Correlation Between IOC and Dash

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

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

Diversification Opportunities for IOC and Dash

0.77

Correlation Coefficient

IOC  Dash

Poor diversification

The 3 months correlation between IOC and Dash is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding IOC and Dash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dash and IOC 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 IOC are associated (or correlated) with Dash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dash has no effect on the direction of IOC i.e., IOC and Dash go up and down completely randomly.

Pair Corralation between IOC and Dash

Assuming the 90 days trading horizon IOC is expected to generate 1.76 times less return on investment than Dash. But when comparing it to its historical volatility, IOC is 1.3 times less risky than Dash. It trades about 0.37 of its potential returns per unit of risk. Dash is currently generating about 0.5 of returns per unit of risk over similar time horizon. If you would invest  2,234  in Dash on September 1, 2024 and sell it today you would earn a total of  1,716  from holding Dash or generate 76.81% return on investment over 90 days.

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

IOC  vs.  Dash

IOC

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IOC are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, IOC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Dash

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dash are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Dash exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IOC and Dash

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

The idea behind IOC and Dash 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.