Correlation Between DSJA and X Square

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

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

Diversification Opportunities for DSJA and X Square

0.64

Correlation Coefficient

DSJA  X Square

Poor diversification

The 3 months correlation between DSJA and SQCBX is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding DSJA and X Square Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X Square Balanced and DSJA 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 DSJA are associated (or correlated) with X Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X Square Balanced has no effect on the direction of DSJA i.e., DSJA and X Square go up and down completely randomly.

Pair Corralation between DSJA and X Square

If you would invest  1,279  in X Square Balanced on September 3, 2024 and sell it today you would earn a total of  93.00  from holding X Square Balanced or generate 7.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

DSJA  vs.  X Square Balanced

DSJA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DSJA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking indicators, DSJA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

X Square Balanced

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in X Square Balanced are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental drivers, X Square may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with DSJA and X Square

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

The idea behind DSJA and X Square Balanced 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.