Correlation Between First State and DNA Brands

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

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

Diversification Opportunities for First State and DNA Brands

0.0

Correlation Coefficient

First State  DNA Brands

Pay attention - limited upside

The 3 months correlation between First and DNA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First State Financial and DNA Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DNA Brands and First State 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 First State Financial 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 First State i.e., First State and DNA Brands go up and down completely randomly.

Pair Corralation between First State and DNA Brands

If you would invest  0.02  in DNA Brands on December 24, 2024 and sell it today you would lose (0.01) from holding DNA Brands or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

First State Financial  vs.  DNA Brands

First State Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days First State Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, First State is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

DNA Brands

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DNA Brands are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, DNA Brands showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First State and DNA Brands

The main advantage of trading using opposite First State and DNA Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First State 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 First State Financial 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .