Correlation Between DXP Enterprises and Core Main

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

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

Diversification Opportunities for DXP Enterprises and Core Main

0.78

Correlation Coefficient

DXP Enterprises  Core Main

Poor diversification

The 3 months correlation between DXP and Core is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding DXP Enterprises and Core Main in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Main and DXP Enterprises 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 DXP Enterprises are associated (or correlated) with Core Main. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Main has no effect on the direction of DXP Enterprises i.e., DXP Enterprises and Core Main go up and down completely randomly.

Pair Corralation between DXP Enterprises and Core Main

Given the investment horizon of 90 days DXP Enterprises is expected to generate 1.09 times more return on investment than Core Main. However, DXP Enterprises is 1.09 times more volatile than Core Main. It trades about 0.15 of its potential returns per unit of risk. Core Main is currently generating about 0.04 per unit of risk. If you would invest  7,327  in DXP Enterprises on November 28, 2024 and sell it today you would earn a total of  1,778  from holding DXP Enterprises or generate 24.27% return on investment over 90 days.

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

DXP Enterprises  vs.  Core Main

DXP Enterprises

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DXP Enterprises are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, DXP Enterprises exhibited solid returns over the last few months and may actually be approaching a breakup point.

Core Main

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Core Main are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Core Main may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with DXP Enterprises and Core Main

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

The idea behind DXP Enterprises and Core Main 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.