Correlation Between RS Public and Dexon Technology

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

By analyzing existing cross correlation between RS Public and Dexon Technology PCL, you can compare the effects of market volatilities on RS Public and Dexon Technology 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 RS Public with a short position of Dexon Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of RS Public and Dexon Technology.

Diversification Opportunities for RS Public and Dexon Technology

0.68

Correlation Coefficient

RS Public  Dexon Technology

Poor diversification

The 3 months correlation between RS Public and Dexon is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding RS Public and Dexon Technology PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dexon Technology PCL and RS Public 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 RS Public are associated (or correlated) with Dexon Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dexon Technology PCL has no effect on the direction of RS Public i.e., RS Public and Dexon Technology go up and down completely randomly.

Pair Corralation between RS Public and Dexon Technology

Assuming the 90 days horizon RS Public is expected to under-perform the Dexon Technology. But the stock apears to be less risky and, when comparing its historical volatility, RS Public is 3.57 times less risky than Dexon Technology. The stock trades about -0.52 of its potential returns per unit of risk. The Dexon Technology PCL is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  156.00  in Dexon Technology PCL on October 6, 2024 and sell it today you would earn a total of  10.00  from holding Dexon Technology PCL or generate 6.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

RS Public  vs.  Dexon Technology PCL

RS Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RS Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Dexon Technology PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dexon Technology PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Dexon Technology is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with RS Public and Dexon Technology

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

The idea behind RS Public and Dexon Technology PCL 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.