Correlation Between Prime Financial and DY6 Metals

Can any of the company-specific risk be diversified away by investing in both Prime Financial and DY6 Metals 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 Prime Financial and DY6 Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Prime Financial Group and DY6 Metals, you can compare the effects of market volatilities on Prime Financial and DY6 Metals 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 Prime Financial with a short position of DY6 Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Financial and DY6 Metals.

Diversification Opportunities for Prime Financial and DY6 Metals

0.09

Correlation Coefficient

Prime Financial  DY6 Metals

Significant diversification

The 3 months correlation between Prime and DY6 is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Prime Financial Group and DY6 Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DY6 Metals and Prime Financial 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 Prime Financial Group are associated (or correlated) with DY6 Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DY6 Metals has no effect on the direction of Prime Financial i.e., Prime Financial and DY6 Metals go up and down completely randomly.

Pair Corralation between Prime Financial and DY6 Metals

Assuming the 90 days trading horizon Prime Financial Group is expected to generate 0.51 times more return on investment than DY6 Metals. However, Prime Financial Group is 1.96 times less risky than DY6 Metals. It trades about 0.04 of its potential returns per unit of risk. DY6 Metals is currently generating about -0.04 per unit of risk. If you would invest  21.00  in Prime Financial Group on December 26, 2024 and sell it today you would earn a total of  1.00  from holding Prime Financial Group or generate 4.76% return on investment over 90 days.

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

Prime Financial Group  vs.  DY6 Metals

Prime Financial Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Financial Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Prime Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

DY6 Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days DY6 Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Prime Financial and DY6 Metals

The main advantage of trading using opposite Prime Financial and DY6 Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prime Financial position performs unexpectedly, DY6 Metals 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 DY6 Metals will offset losses from the drop in DY6 Metals' long position.

The idea behind Prime Financial Group and DY6 Metals 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.