Correlation Between Planet Labs and Ducommun Incorporated

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

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

Diversification Opportunities for Planet Labs and Ducommun Incorporated

0.11

Correlation Coefficient

Planet Labs  Ducommun Incorporated

Average diversification

The 3 months correlation between Planet and Ducommun is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Planet Labs PBC and Ducommun Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ducommun Incorporated and Planet Labs 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 Planet Labs PBC are associated (or correlated) with Ducommun Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ducommun Incorporated has no effect on the direction of Planet Labs i.e., Planet Labs and Ducommun Incorporated go up and down completely randomly.

Pair Corralation between Planet Labs and Ducommun Incorporated

Allowing for the 90-day total investment horizon Planet Labs PBC is expected to generate 1.81 times more return on investment than Ducommun Incorporated. However, Planet Labs is 1.81 times more volatile than Ducommun Incorporated. It trades about 0.1 of its potential returns per unit of risk. Ducommun Incorporated is currently generating about -0.13 per unit of risk. If you would invest  378.00  in Planet Labs PBC on September 26, 2024 and sell it today you would earn a total of  30.00  from holding Planet Labs PBC or generate 7.94% return on investment over 90 days.

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

Planet Labs PBC  vs.  Ducommun Incorporated

Planet Labs PBC

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Labs PBC are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Planet Labs disclosed solid returns over the last few months and may actually be approaching a breakup point.

Ducommun Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Planet Labs and Ducommun Incorporated

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

The idea behind Planet Labs PBC and Ducommun Incorporated 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 CEOs Directory module to screen CEOs from public companies around the world.