Correlation Between DL Industries and Crown Asia

Can any of the company-specific risk be diversified away by investing in both DL Industries and Crown Asia 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 DL Industries and Crown Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DL Industries and Crown Asia Chemicals, you can compare the effects of market volatilities on DL Industries and Crown Asia 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 DL Industries with a short position of Crown Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of DL Industries and Crown Asia.

Diversification Opportunities for DL Industries and Crown Asia

0.67

Correlation Coefficient

DL Industries  Crown Asia

Poor diversification

The 3 months correlation between DNL and Crown is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding DL Industries and Crown Asia Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Asia Chemicals and DL Industries 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 DL Industries are associated (or correlated) with Crown Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Asia Chemicals has no effect on the direction of DL Industries i.e., DL Industries and Crown Asia go up and down completely randomly.

Pair Corralation between DL Industries and Crown Asia

Assuming the 90 days trading horizon DL Industries is expected to under-perform the Crown Asia. But the stock apears to be less risky and, when comparing its historical volatility, DL Industries is 1.21 times less risky than Crown Asia. The stock trades about -0.05 of its potential returns per unit of risk. The Crown Asia Chemicals is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  185.00  in Crown Asia Chemicals on September 15, 2024 and sell it today you would lose (8.00) from holding Crown Asia Chemicals or give up 4.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

DL Industries  vs.  Crown Asia Chemicals

DL Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DL Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, DL Industries is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Crown Asia Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Asia Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Crown Asia is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with DL Industries and Crown Asia

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

The idea behind DL Industries and Crown Asia Chemicals 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.