Correlation Between Dentsu and Dentsu

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

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

Diversification Opportunities for Dentsu and Dentsu

-0.5

Correlation Coefficient

Dentsu  Dentsu

Very good diversification

The 3 months correlation between Dentsu and Dentsu is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Dentsu Inc ADR and Dentsu Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dentsu Inc and Dentsu 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 Dentsu Inc ADR are associated (or correlated) with Dentsu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dentsu Inc has no effect on the direction of Dentsu i.e., Dentsu and Dentsu go up and down completely randomly.

Pair Corralation between Dentsu and Dentsu

Assuming the 90 days horizon Dentsu Inc ADR is expected to under-perform the Dentsu. But the pink sheet apears to be less risky and, when comparing its historical volatility, Dentsu Inc ADR is 4.41 times less risky than Dentsu. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Dentsu Inc is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,753  in Dentsu Inc on September 5, 2024 and sell it today you would lose (114.00) from holding Dentsu Inc or give up 4.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	15.63%
Values	Daily Returns

Dentsu Inc ADR  vs.  Dentsu Inc

Dentsu Inc ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dentsu Inc ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Dentsu Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Dentsu and Dentsu

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

The idea behind Dentsu Inc ADR and Dentsu 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.