Correlation Between Dividend Select and Prime Dividend

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

By analyzing existing cross correlation between Dividend Select 15 and Prime Dividend Corp, you can compare the effects of market volatilities on Dividend Select and Prime Dividend 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 Dividend Select with a short position of Prime Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dividend Select and Prime Dividend.

Diversification Opportunities for Dividend Select and Prime Dividend

0.91

Correlation Coefficient

Dividend Select  Prime Dividend

Almost no diversification

The 3 months correlation between Dividend and Prime is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Dividend Select 15 and Prime Dividend Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Dividend Corp and Dividend Select 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 Dividend Select 15 are associated (or correlated) with Prime Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Dividend Corp has no effect on the direction of Dividend Select i.e., Dividend Select and Prime Dividend go up and down completely randomly.

Pair Corralation between Dividend Select and Prime Dividend

Assuming the 90 days horizon Dividend Select is expected to generate 3.2 times less return on investment than Prime Dividend. But when comparing it to its historical volatility, Dividend Select 15 is 2.24 times less risky than Prime Dividend. It trades about 0.2 of its potential returns per unit of risk. Prime Dividend Corp is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  646.00  in Prime Dividend Corp on September 2, 2024 and sell it today you would earn a total of  220.00  from holding Prime Dividend Corp or generate 34.06% return on investment over 90 days.

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

Dividend Select 15  vs.  Prime Dividend Corp

Dividend Select 15

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dividend Select 15 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Dividend Select may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Prime Dividend Corp

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Dividend Corp are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Prime Dividend displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dividend Select and Prime Dividend

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

The idea behind Dividend Select 15 and Prime Dividend Corp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.