Correlation Between RiverNorth Specialty and DHCNI

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

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

Diversification Opportunities for RiverNorth Specialty and DHCNI

-0.39

Correlation Coefficient

RiverNorth Specialty  DHCNI

Very good diversification

The 3 months correlation between RiverNorth and DHCNI is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding RiverNorth Specialty Finance and DHCNI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DHCNI and RiverNorth Specialty 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 RiverNorth Specialty Finance are associated (or correlated) with DHCNI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DHCNI has no effect on the direction of RiverNorth Specialty i.e., RiverNorth Specialty and DHCNI go up and down completely randomly.

Pair Corralation between RiverNorth Specialty and DHCNI

Considering the 90-day investment horizon RiverNorth Specialty is expected to generate 1.41 times less return on investment than DHCNI. But when comparing it to its historical volatility, RiverNorth Specialty Finance is 2.47 times less risky than DHCNI. It trades about 0.12 of its potential returns per unit of risk. DHCNI is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,483  in DHCNI on September 23, 2024 and sell it today you would earn a total of  26.00  from holding DHCNI or generate 1.75% return on investment over 90 days.

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

RiverNorth Specialty Finance  vs.  DHCNI

RiverNorth Specialty

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RiverNorth Specialty Finance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, RiverNorth Specialty is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

DHCNI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DHCNI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with RiverNorth Specialty and DHCNI

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

The idea behind RiverNorth Specialty Finance and DHCNI 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.