Correlation Between Davis Commodities and PetMed Express

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

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

Diversification Opportunities for Davis Commodities and PetMed Express

0.68

Correlation Coefficient

Davis Commodities  PetMed Express

Poor diversification

The 3 months correlation between Davis and PetMed is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Davis Commodities Limited and PetMed Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetMed Express and Davis Commodities 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 Davis Commodities Limited are associated (or correlated) with PetMed Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetMed Express has no effect on the direction of Davis Commodities i.e., Davis Commodities and PetMed Express go up and down completely randomly.

Pair Corralation between Davis Commodities and PetMed Express

Given the investment horizon of 90 days Davis Commodities Limited is expected to under-perform the PetMed Express. But the stock apears to be less risky and, when comparing its historical volatility, Davis Commodities Limited is 1.16 times less risky than PetMed Express. The stock trades about -0.07 of its potential returns per unit of risk. The PetMed Express is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  500.00  in PetMed Express on December 28, 2024 and sell it today you would lose (76.00) from holding PetMed Express or give up 15.2% of portfolio value over 90 days.

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

Davis Commodities Limited  vs.  PetMed Express

Davis Commodities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Davis Commodities Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

PetMed Express

Risk-Adjusted Performance

Very Weak

Over the last 90 days PetMed Express 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 stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Davis Commodities and PetMed Express

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

The idea behind Davis Commodities Limited and PetMed Express 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.