Correlation Between Global Develpmts and Dragon Capital

Can any of the company-specific risk be diversified away by investing in both Global Develpmts and Dragon Capital 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 Global Develpmts and Dragon Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global Develpmts and Dragon Capital Grp, you can compare the effects of market volatilities on Global Develpmts and Dragon Capital 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 Global Develpmts with a short position of Dragon Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Develpmts and Dragon Capital.

Diversification Opportunities for Global Develpmts and Dragon Capital

-0.11

Correlation Coefficient

Global Develpmts  Dragon Capital

Good diversification

The 3 months correlation between Global and Dragon is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Global Develpmts and Dragon Capital Grp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dragon Capital Grp and Global Develpmts 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 Global Develpmts are associated (or correlated) with Dragon Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dragon Capital Grp has no effect on the direction of Global Develpmts i.e., Global Develpmts and Dragon Capital go up and down completely randomly.

Pair Corralation between Global Develpmts and Dragon Capital

Given the investment horizon of 90 days Global Develpmts is expected to generate 24.98 times less return on investment than Dragon Capital. But when comparing it to its historical volatility, Global Develpmts is 3.13 times less risky than Dragon Capital. It trades about 0.01 of its potential returns per unit of risk. Dragon Capital Grp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.08  in Dragon Capital Grp on September 14, 2024 and sell it today you would lose (0.06) from holding Dragon Capital Grp or give up 75.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Global Develpmts  vs.  Dragon Capital Grp

Global Develpmts

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dragon Capital Grp

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Global Develpmts and Dragon Capital

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

The idea behind Global Develpmts and Dragon Capital Grp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.