Correlation Between Investment and Van Dien

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

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

Diversification Opportunities for Investment and Van Dien

-0.31

Correlation Coefficient

Investment  Van Dien

Very good diversification

The 3 months correlation between Investment and Van is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Investment And Construction and Van Dien Fused in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Van Dien Fused and Investment 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 Investment And Construction are associated (or correlated) with Van Dien. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Van Dien Fused has no effect on the direction of Investment i.e., Investment and Van Dien go up and down completely randomly.

Pair Corralation between Investment and Van Dien

Assuming the 90 days trading horizon Investment And Construction is expected to under-perform the Van Dien. But the stock apears to be less risky and, when comparing its historical volatility, Investment And Construction is 1.55 times less risky than Van Dien. The stock trades about -0.01 of its potential returns per unit of risk. The Van Dien Fused is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,335,000  in Van Dien Fused on December 22, 2024 and sell it today you would earn a total of  475,000  from holding Van Dien Fused or generate 35.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	64.41%
Values	Daily Returns

Investment And Construction  vs.  Van Dien Fused

Investment And Const

Risk-Adjusted Performance

Very Weak

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

Van Dien Fused

Risk-Adjusted Performance

Good

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

Pair Trading with Investment and Van Dien

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

The idea behind Investment And Construction and Van Dien Fused 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.