Correlation Between Democracy International and Martin Currie

Can any of the company-specific risk be diversified away by investing in both Democracy International and Martin Currie 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 Democracy International and Martin Currie into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Democracy International and Martin Currie Sustainable, you can compare the effects of market volatilities on Democracy International and Martin Currie 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 Democracy International with a short position of Martin Currie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Democracy International and Martin Currie.

Diversification Opportunities for Democracy International and Martin Currie

0.86

Correlation Coefficient

Democracy International  Martin Currie

Very poor diversification

The 3 months correlation between Democracy and Martin is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Democracy International and Martin Currie Sustainable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Martin Currie Sustainable and Democracy International 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 Democracy International are associated (or correlated) with Martin Currie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Martin Currie Sustainable has no effect on the direction of Democracy International i.e., Democracy International and Martin Currie go up and down completely randomly.

Pair Corralation between Democracy International and Martin Currie

Given the investment horizon of 90 days Democracy International is expected to generate 0.67 times more return on investment than Martin Currie. However, Democracy International is 1.49 times less risky than Martin Currie. It trades about 0.14 of its potential returns per unit of risk. Martin Currie Sustainable is currently generating about 0.06 per unit of risk. If you would invest  2,484  in Democracy International on December 22, 2024 and sell it today you would earn a total of  177.00  from holding Democracy International or generate 7.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Democracy International  vs.  Martin Currie Sustainable

Democracy International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Democracy International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, Democracy International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Martin Currie Sustainable

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Currie Sustainable are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Martin Currie is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Democracy International and Martin Currie

The main advantage of trading using opposite Democracy International and Martin Currie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Democracy International position performs unexpectedly, Martin Currie 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 Martin Currie will offset losses from the drop in Martin Currie's long position.

The idea behind Democracy International and Martin Currie Sustainable 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.