Correlation Between DNA Brands and Hill Street

Can any of the company-specific risk be diversified away by investing in both DNA Brands and Hill Street 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 DNA Brands and Hill Street into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DNA Brands and Hill Street Beverage, you can compare the effects of market volatilities on DNA Brands and Hill Street 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 DNA Brands with a short position of Hill Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of DNA Brands and Hill Street.

Diversification Opportunities for DNA Brands and Hill Street

0.17

Correlation Coefficient

DNA Brands  Hill Street

Average diversification

The 3 months correlation between DNA and Hill is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding DNA Brands and Hill Street Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hill Street Beverage and DNA Brands 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 DNA Brands are associated (or correlated) with Hill Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hill Street Beverage has no effect on the direction of DNA Brands i.e., DNA Brands and Hill Street go up and down completely randomly.

Pair Corralation between DNA Brands and Hill Street

Given the investment horizon of 90 days DNA Brands is expected to generate 6.95 times more return on investment than Hill Street. However, DNA Brands is 6.95 times more volatile than Hill Street Beverage. It trades about 0.15 of its potential returns per unit of risk. Hill Street Beverage is currently generating about 0.06 per unit of risk. If you would invest  0.02  in DNA Brands on December 27, 2024 and sell it today you would lose (0.01) from holding DNA Brands or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

DNA Brands  vs.  Hill Street Beverage

DNA Brands

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DNA Brands are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, DNA Brands showed solid returns over the last few months and may actually be approaching a breakup point.

Hill Street Beverage

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hill Street Beverage are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical and fundamental indicators, Hill Street reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DNA Brands and Hill Street

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

The idea behind DNA Brands and Hill Street Beverage 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.