Correlation Between Eq Energy and DNA Brands

Can any of the company-specific risk be diversified away by investing in both Eq Energy and DNA Brands 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 Eq Energy and DNA Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eq Energy Drink and DNA Brands, you can compare the effects of market volatilities on Eq Energy and DNA Brands 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 Eq Energy with a short position of DNA Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eq Energy and DNA Brands.

Diversification Opportunities for Eq Energy and DNA Brands

0.32

Correlation Coefficient

Eq Energy  DNA Brands

Weak diversification

The 3 months correlation between EQLB and DNA is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Eq Energy Drink and DNA Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DNA Brands and Eq Energy 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 Eq Energy Drink are associated (or correlated) with DNA Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DNA Brands has no effect on the direction of Eq Energy i.e., Eq Energy and DNA Brands go up and down completely randomly.

Pair Corralation between Eq Energy and DNA Brands

Given the investment horizon of 90 days Eq Energy Drink is expected to under-perform the DNA Brands. But the pink sheet apears to be less risky and, when comparing its historical volatility, Eq Energy Drink is 2.98 times less risky than DNA Brands. The pink sheet trades about -0.02 of its potential returns per unit of risk. The DNA Brands is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  0.01  in DNA Brands on September 4, 2024 and sell it today you would earn a total of  0.00  from holding DNA Brands or generate 0.0% return on investment over 90 days.

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

Eq Energy Drink  vs.  DNA Brands

Eq Energy Drink

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eq Energy Drink has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

DNA Brands

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DNA Brands are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, DNA Brands showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eq Energy and DNA Brands

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

The idea behind Eq Energy Drink and DNA Brands 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.