Correlation Between Donegal Investment and Draper Esprit

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

By analyzing existing cross correlation between Donegal Investment Group and Draper Esprit plc, you can compare the effects of market volatilities on Donegal Investment and Draper Esprit 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 Donegal Investment with a short position of Draper Esprit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Donegal Investment and Draper Esprit.

Diversification Opportunities for Donegal Investment and Draper Esprit

0.49

Correlation Coefficient

Donegal Investment  Draper Esprit

Very weak diversification

The 3 months correlation between Donegal and Draper is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Donegal Investment Group and Draper Esprit plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Draper Esprit plc and Donegal Investment 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 Donegal Investment Group are associated (or correlated) with Draper Esprit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Draper Esprit plc has no effect on the direction of Donegal Investment i.e., Donegal Investment and Draper Esprit go up and down completely randomly.

Pair Corralation between Donegal Investment and Draper Esprit

Assuming the 90 days trading horizon Donegal Investment Group is expected to generate 42.15 times more return on investment than Draper Esprit. However, Donegal Investment is 42.15 times more volatile than Draper Esprit plc. It trades about 0.11 of its potential returns per unit of risk. Draper Esprit plc is currently generating about -0.01 per unit of risk. If you would invest  1,660  in Donegal Investment Group on December 30, 2024 and sell it today you would lose (10.00) from holding Donegal Investment Group or give up 0.6% of portfolio value over 90 days.

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

Donegal Investment Group  vs.  Draper Esprit plc

Donegal Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Donegal Investment Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Donegal Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Draper Esprit plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Draper Esprit plc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Draper Esprit 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 Donegal Investment and Draper Esprit

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

The idea behind Donegal Investment Group and Draper Esprit plc 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.