Correlation Between Diamond Estates and Exco Technologies

Can any of the company-specific risk be diversified away by investing in both Diamond Estates and Exco Technologies 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 Exco Technologies 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 Exco Technologies Limited, you can compare the effects of market volatilities on Diamond Estates and Exco Technologies 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 Exco Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Estates and Exco Technologies.

Diversification Opportunities for Diamond Estates and Exco Technologies

0.33

Correlation Coefficient

Diamond Estates  Exco Technologies

Weak diversification

The 3 months correlation between Diamond and Exco is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Estates Wines and Exco Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exco Technologies 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 Exco Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exco Technologies has no effect on the direction of Diamond Estates i.e., Diamond Estates and Exco Technologies go up and down completely randomly.

Pair Corralation between Diamond Estates and Exco Technologies

Assuming the 90 days horizon Diamond Estates Wines is expected to under-perform the Exco Technologies. In addition to that, Diamond Estates is 3.34 times more volatile than Exco Technologies Limited. It trades about -0.15 of its total potential returns per unit of risk. Exco Technologies Limited is currently generating about -0.18 per unit of volatility. If you would invest  790.00  in Exco Technologies Limited on October 11, 2024 and sell it today you would lose (35.00) from holding Exco Technologies Limited or give up 4.43% of portfolio value over 90 days.

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

Diamond Estates Wines  vs.  Exco Technologies Limited

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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Exco Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exco Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Exco Technologies is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Diamond Estates and Exco Technologies

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

The idea behind Diamond Estates Wines and Exco Technologies Limited 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.