Correlation Between Diamond Estates and Chemtrade Logistics

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

By analyzing existing cross correlation between Diamond Estates Wines and Chemtrade Logistics Income, you can compare the effects of market volatilities on Diamond Estates and Chemtrade Logistics 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 Diamond Estates with a short position of Chemtrade Logistics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Estates and Chemtrade Logistics.

Diversification Opportunities for Diamond Estates and Chemtrade Logistics

-0.55

Correlation Coefficient

Diamond Estates  Chemtrade Logistics

Excellent diversification

The 3 months correlation between Diamond and Chemtrade is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Estates Wines and Chemtrade Logistics Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemtrade Logistics and Diamond Estates 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 Diamond Estates Wines are associated (or correlated) with Chemtrade Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemtrade Logistics has no effect on the direction of Diamond Estates i.e., Diamond Estates and Chemtrade Logistics go up and down completely randomly.

Pair Corralation between Diamond Estates and Chemtrade Logistics

Assuming the 90 days horizon Diamond Estates Wines is expected to under-perform the Chemtrade Logistics. In addition to that, Diamond Estates is 3.73 times more volatile than Chemtrade Logistics Income. It trades about -0.04 of its total potential returns per unit of risk. Chemtrade Logistics Income is currently generating about 0.16 per unit of volatility. If you would invest  1,005  in Chemtrade Logistics Income on September 12, 2024 and sell it today you would earn a total of  134.00  from holding Chemtrade Logistics Income or generate 13.33% return on investment over 90 days.

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

Diamond Estates Wines  vs.  Chemtrade Logistics Income

Diamond Estates Wines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diamond Estates Wines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Chemtrade Logistics

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chemtrade Logistics Income are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, Chemtrade Logistics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diamond Estates and Chemtrade Logistics

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

The idea behind Diamond Estates Wines and Chemtrade Logistics Income 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.