Correlation Between Caltagirone SpA and DexCom

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

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

Diversification Opportunities for Caltagirone SpA and DexCom

-0.32

Correlation Coefficient

Caltagirone SpA  DexCom

Very good diversification

The 3 months correlation between Caltagirone and DexCom is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Caltagirone SpA and DexCom Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DexCom Inc and Caltagirone SpA 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 Caltagirone SpA 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 Caltagirone SpA i.e., Caltagirone SpA and DexCom go up and down completely randomly.

Pair Corralation between Caltagirone SpA and DexCom

Assuming the 90 days trading horizon Caltagirone SpA is expected to generate 0.93 times more return on investment than DexCom. However, Caltagirone SpA is 1.07 times less risky than DexCom. It trades about 0.11 of its potential returns per unit of risk. DexCom Inc is currently generating about -0.07 per unit of risk. If you would invest  604.00  in Caltagirone SpA on December 29, 2024 and sell it today you would earn a total of  94.00  from holding Caltagirone SpA or generate 15.56% return on investment over 90 days.

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

Caltagirone SpA  vs.  DexCom Inc

Caltagirone SpA

Risk-Adjusted Performance

OK

Over the last 90 days Caltagirone SpA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively weak basic indicators, Caltagirone SpA unveiled solid returns over the last few months and may actually be approaching a breakup point.

DexCom Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days DexCom Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Caltagirone SpA and DexCom

The main advantage of trading using opposite Caltagirone SpA and DexCom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caltagirone SpA 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 Caltagirone SpA 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.