Correlation Between FPT Digital and DIC Holdings

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

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

Diversification Opportunities for FPT Digital and DIC Holdings

0.09

Correlation Coefficient

FPT Digital  DIC Holdings

Significant diversification

The 3 months correlation between FPT and DIC is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding FPT Digital Retail 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 FPT Digital 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 FPT Digital Retail 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 FPT Digital i.e., FPT Digital and DIC Holdings go up and down completely randomly.

Pair Corralation between FPT Digital and DIC Holdings

Assuming the 90 days trading horizon FPT Digital is expected to generate 1.19 times less return on investment than DIC Holdings. But when comparing it to its historical volatility, FPT Digital Retail is 3.95 times less risky than DIC Holdings. It trades about 0.43 of its potential returns per unit of risk. DIC Holdings Construction is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,210,000  in DIC Holdings Construction on September 15, 2024 and sell it today you would earn a total of  120,000  from holding DIC Holdings Construction or generate 9.92% return on investment over 90 days.

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

FPT Digital Retail  vs.  DIC Holdings Construction

FPT Digital Retail

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FPT Digital Retail are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, FPT Digital 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

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DIC Holdings Construction are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, DIC Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FPT Digital and DIC Holdings

The main advantage of trading using opposite FPT Digital and DIC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FPT Digital 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 FPT Digital Retail 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.