Correlation Between Power Finance and DCM Financial

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

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

Diversification Opportunities for Power Finance and DCM Financial

-0.03

Correlation Coefficient

Power Finance  DCM Financial

Good diversification

The 3 months correlation between Power and DCM is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Power Finance and DCM Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DCM Financial Services and Power Finance 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 Power Finance are associated (or correlated) with DCM Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DCM Financial Services has no effect on the direction of Power Finance i.e., Power Finance and DCM Financial go up and down completely randomly.

Pair Corralation between Power Finance and DCM Financial

Assuming the 90 days trading horizon Power Finance is expected to generate 1.1 times more return on investment than DCM Financial. However, Power Finance is 1.1 times more volatile than DCM Financial Services. It trades about 0.1 of its potential returns per unit of risk. DCM Financial Services is currently generating about 0.04 per unit of risk. If you would invest  10,075  in Power Finance on October 24, 2024 and sell it today you would earn a total of  32,715  from holding Power Finance or generate 324.71% return on investment over 90 days.

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

Power Finance  vs.  DCM Financial Services

Power Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Power Finance is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

DCM Financial Services

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DCM Financial Services are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, DCM Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Power Finance and DCM Financial

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

The idea behind Power Finance and DCM Financial Services 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.