Correlation Between Matrix and Danel

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

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

Diversification Opportunities for Matrix and Danel

0.92

Correlation Coefficient

Matrix  Danel

Almost no diversification

The 3 months correlation between Matrix and Danel is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Matrix and Danel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danel and Matrix 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 Matrix are associated (or correlated) with Danel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danel has no effect on the direction of Matrix i.e., Matrix and Danel go up and down completely randomly.

Pair Corralation between Matrix and Danel

Assuming the 90 days trading horizon Matrix is expected to generate 0.88 times more return on investment than Danel. However, Matrix is 1.14 times less risky than Danel. It trades about 0.15 of its potential returns per unit of risk. Danel is currently generating about 0.09 per unit of risk. If you would invest  815,415  in Matrix on November 28, 2024 and sell it today you would earn a total of  85,585  from holding Matrix or generate 10.5% return on investment over 90 days.

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

Matrix  vs.  Danel

Matrix

Risk-Adjusted Performance

Good

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

Danel

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Danel are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Danel may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Matrix and Danel

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

The idea behind Matrix and Danel 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.