Correlation Between Elcom Technology and DIC Holdings

Can any of the company-specific risk be diversified away by investing in both Elcom Technology and DIC Holdings 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 Elcom Technology and DIC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Elcom Technology Communications and DIC Holdings Construction, you can compare the effects of market volatilities on Elcom Technology and DIC Holdings 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 Elcom Technology with a short position of DIC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elcom Technology and DIC Holdings.

Diversification Opportunities for Elcom Technology and DIC Holdings

-0.31

Correlation Coefficient

Elcom Technology  DIC Holdings

Very good diversification

The 3 months correlation between Elcom and DIC is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Elcom Technology Communication and DIC Holdings Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIC Holdings Construction and Elcom Technology 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 Elcom Technology Communications are associated (or correlated) with DIC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIC Holdings Construction has no effect on the direction of Elcom Technology i.e., Elcom Technology and DIC Holdings go up and down completely randomly.

Pair Corralation between Elcom Technology and DIC Holdings

Assuming the 90 days trading horizon Elcom Technology Communications is expected to under-perform the DIC Holdings. In addition to that, Elcom Technology is 1.57 times more volatile than DIC Holdings Construction. It trades about -0.06 of its total potential returns per unit of risk. DIC Holdings Construction is currently generating about 0.31 per unit of volatility. If you would invest  1,090,000  in DIC Holdings Construction on December 10, 2024 and sell it today you would earn a total of  160,000  from holding DIC Holdings Construction or generate 14.68% return on investment over 90 days.

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

Elcom Technology Communication  vs.  DIC Holdings Construction

Elcom Technology Com

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Elcom Technology Communications are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Elcom Technology is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

DIC Holdings Construction

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Elcom Technology and DIC Holdings

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

The idea behind Elcom Technology Communications and DIC Holdings Construction 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.