Correlation Between DexCom and ALR Technologies

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Can any of the company-specific risk be diversified away by investing in both DexCom and ALR 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 DexCom and ALR Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DexCom Inc and ALR Technologies, you can compare the effects of market volatilities on DexCom and ALR 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 DexCom with a short position of ALR Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of DexCom and ALR Technologies.

Diversification Opportunities for DexCom and ALR Technologies

-0.67
  Correlation Coefficient

Excellent diversification

The 3 months correlation between DexCom and ALR is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding DexCom Inc and ALR Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALR Technologies and DexCom 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 DexCom Inc are associated (or correlated) with ALR Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALR Technologies has no effect on the direction of DexCom i.e., DexCom and ALR Technologies go up and down completely randomly.

Pair Corralation between DexCom and ALR Technologies

Given the investment horizon of 90 days DexCom Inc is expected to under-perform the ALR Technologies. But the stock apears to be less risky and, when comparing its historical volatility, DexCom Inc is 4.89 times less risky than ALR Technologies. The stock trades about -0.03 of its potential returns per unit of risk. The ALR Technologies is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1.01  in ALR Technologies on September 23, 2024 and sell it today you would lose (0.06) from holding ALR Technologies or give up 5.94% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

DexCom Inc  vs.  ALR Technologies

 Performance 
       Timeline  
DexCom Inc 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in DexCom Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, DexCom displayed solid returns over the last few months and may actually be approaching a breakup point.
ALR Technologies 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in ALR Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, ALR Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

DexCom and ALR Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DexCom and ALR Technologies

The main advantage of trading using opposite DexCom and ALR Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DexCom position performs unexpectedly, ALR 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 ALR Technologies will offset losses from the drop in ALR Technologies' long position.
The idea behind DexCom Inc and ALR Technologies 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.
Check out your portfolio center.
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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