Correlation Between TFS FINANCIAL and DexCom

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

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

Diversification Opportunities for TFS FINANCIAL and DexCom

0.22

Correlation Coefficient

TFS FINANCIAL  DexCom

Modest diversification

The 3 months correlation between TFS and DexCom is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding TFS FINANCIAL and DexCom Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DexCom Inc and TFS 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 TFS FINANCIAL are associated (or correlated) with DexCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DexCom Inc has no effect on the direction of TFS FINANCIAL i.e., TFS FINANCIAL and DexCom go up and down completely randomly.

Pair Corralation between TFS FINANCIAL and DexCom

Assuming the 90 days trading horizon TFS FINANCIAL is expected to under-perform the DexCom. But the stock apears to be less risky and, when comparing its historical volatility, TFS FINANCIAL is 1.27 times less risky than DexCom. The stock trades about -0.04 of its potential returns per unit of risk. The DexCom Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  7,506  in DexCom Inc on December 3, 2024 and sell it today you would earn a total of  912.00  from holding DexCom Inc or generate 12.15% return on investment over 90 days.

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

TFS FINANCIAL  vs.  DexCom Inc

TFS FINANCIAL

Risk-Adjusted Performance

Very Weak

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

DexCom Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DexCom Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DexCom reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TFS FINANCIAL and DexCom

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

The idea behind TFS FINANCIAL and DexCom Inc 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.