Correlation Between DMCI Holdings and NN

Can any of the company-specific risk be diversified away by investing in both DMCI Holdings and NN at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining DMCI Holdings and NN into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DMCI Holdings ADR and NN Inc, you can compare the effects of market volatilities on DMCI Holdings and NN and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in DMCI Holdings with a short position of NN. Check out your portfolio center. Please also check ongoing floating volatility patterns of DMCI Holdings and NN.

Diversification Opportunities for DMCI Holdings and NN

0.26

Correlation Coefficient

DMCI Holdings  NN

Modest diversification

The 3 months correlation between DMCI and NN is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding DMCI Holdings ADR and NN Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NN Inc and DMCI Holdings is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on DMCI Holdings ADR are associated (or correlated) with NN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NN Inc has no effect on the direction of DMCI Holdings i.e., DMCI Holdings and NN go up and down completely randomly.

Pair Corralation between DMCI Holdings and NN

Assuming the 90 days horizon DMCI Holdings ADR is expected to under-perform the NN. But the pink sheet apears to be less risky and, when comparing its historical volatility, DMCI Holdings ADR is 1.79 times less risky than NN. The pink sheet trades about -0.03 of its potential returns per unit of risk. The NN Inc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  302.00  in NN Inc on September 5, 2024 and sell it today you would earn a total of  122.00  from holding NN Inc or generate 40.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	80.0%
Values	Daily Returns

DMCI Holdings ADR  vs.  NN Inc

DMCI Holdings ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DMCI Holdings ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, DMCI Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

NN Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NN Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, NN reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DMCI Holdings and NN

The main advantage of trading using opposite DMCI Holdings and NN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DMCI Holdings position performs unexpectedly, NN can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in NN will offset losses from the drop in NN's long position.

The idea behind DMCI Holdings ADR and NN Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.