Correlation Between Future Retail and Dynamic Cables

Can any of the company-specific risk be diversified away by investing in both Future Retail and Dynamic Cables 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 Future Retail and Dynamic Cables into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Future Retail Limited and Dynamic Cables Limited, you can compare the effects of market volatilities on Future Retail and Dynamic Cables 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 Future Retail with a short position of Dynamic Cables. Check out your portfolio center. Please also check ongoing floating volatility patterns of Future Retail and Dynamic Cables.

Diversification Opportunities for Future Retail and Dynamic Cables

0.0

Correlation Coefficient

Future Retail  Dynamic Cables

Pay attention - limited upside

The 3 months correlation between Future and Dynamic is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Future Retail Limited and Dynamic Cables Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynamic Cables and Future Retail 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 Future Retail Limited are associated (or correlated) with Dynamic Cables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynamic Cables has no effect on the direction of Future Retail i.e., Future Retail and Dynamic Cables go up and down completely randomly.

Pair Corralation between Future Retail and Dynamic Cables

Assuming the 90 days trading horizon Future Retail Limited is expected to under-perform the Dynamic Cables. But the stock apears to be less risky and, when comparing its historical volatility, Future Retail Limited is 1.36 times less risky than Dynamic Cables. The stock trades about -0.03 of its potential returns per unit of risk. The Dynamic Cables Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  21,299  in Dynamic Cables Limited on October 11, 2024 and sell it today you would earn a total of  78,881  from holding Dynamic Cables Limited or generate 370.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	90.06%
Values	Daily Returns

Future Retail Limited  vs.  Dynamic Cables Limited

Future Retail Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Future Retail Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Future Retail is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Dynamic Cables

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic Cables Limited are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Dynamic Cables unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Future Retail and Dynamic Cables

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

The idea behind Future Retail Limited and Dynamic Cables Limited 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.