Correlation Between Dye Durham and Sage Group

Can any of the company-specific risk be diversified away by investing in both Dye Durham and Sage Group 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 Dye Durham and Sage Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dye Durham Limited and Sage Group PLC, you can compare the effects of market volatilities on Dye Durham and Sage Group 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 Dye Durham with a short position of Sage Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dye Durham and Sage Group.

Diversification Opportunities for Dye Durham and Sage Group

0.07

Correlation Coefficient

Dye Durham  Sage Group

Significant diversification

The 3 months correlation between Dye and Sage is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Dye Durham Limited and Sage Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sage Group PLC and Dye Durham 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 Dye Durham Limited are associated (or correlated) with Sage Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sage Group PLC has no effect on the direction of Dye Durham i.e., Dye Durham and Sage Group go up and down completely randomly.

Pair Corralation between Dye Durham and Sage Group

Assuming the 90 days horizon Dye Durham Limited is expected to under-perform the Sage Group. In addition to that, Dye Durham is 3.97 times more volatile than Sage Group PLC. It trades about -0.12 of its total potential returns per unit of risk. Sage Group PLC is currently generating about -0.08 per unit of volatility. If you would invest  6,480  in Sage Group PLC on December 19, 2024 and sell it today you would lose (377.00) from holding Sage Group PLC or give up 5.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Dye Durham Limited  vs.  Sage Group PLC

Dye Durham Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dye Durham Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Sage Group PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sage Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Sage Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dye Durham and Sage Group

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

The idea behind Dye Durham Limited and Sage Group PLC 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.