Correlation Between DENSO CORP and Dno ASA

Can any of the company-specific risk be diversified away by investing in both DENSO CORP and Dno ASA 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 DENSO CORP and Dno ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DENSO P ADR and Dno ASA, you can compare the effects of market volatilities on DENSO CORP and Dno ASA 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 DENSO CORP with a short position of Dno ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of DENSO CORP and Dno ASA.

Diversification Opportunities for DENSO CORP and Dno ASA

0.98

Correlation Coefficient

DENSO CORP  Dno ASA

Almost no diversification

The 3 months correlation between DENSO and Dno is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding DENSO P ADR and Dno ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dno ASA and DENSO CORP 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 DENSO P ADR are associated (or correlated) with Dno ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dno ASA has no effect on the direction of DENSO CORP i.e., DENSO CORP and Dno ASA go up and down completely randomly.

Pair Corralation between DENSO CORP and Dno ASA

Assuming the 90 days trading horizon DENSO P ADR is expected to under-perform the Dno ASA. But the stock apears to be less risky and, when comparing its historical volatility, DENSO P ADR is 1.19 times less risky than Dno ASA. The stock trades about -0.07 of its potential returns per unit of risk. The Dno ASA is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,330  in Dno ASA on December 28, 2024 and sell it today you would lose (90.00) from holding Dno ASA or give up 6.77% of portfolio value over 90 days.

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

DENSO P ADR  vs.  Dno ASA

DENSO P ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days DENSO P ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Dno ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dno ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Dno ASA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with DENSO CORP and Dno ASA

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

The idea behind DENSO P ADR and Dno ASA 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.