Correlation Between Sage Group and Dye Durham

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

By analyzing existing cross correlation between Sage Group PLC and Dye Durham Limited, you can compare the effects of market volatilities on Sage Group and Dye Durham 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 Sage Group with a short position of Dye Durham. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sage Group and Dye Durham.

Diversification Opportunities for Sage Group and Dye Durham

0.07

Correlation Coefficient

Sage Group  Dye Durham

Significant diversification

The 3 months correlation between Sage and Dye is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Sage Group PLC and Dye Durham Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dye Durham Limited and Sage Group 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 Sage Group PLC are associated (or correlated) with Dye Durham. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dye Durham Limited has no effect on the direction of Sage Group i.e., Sage Group and Dye Durham go up and down completely randomly.

Pair Corralation between Sage Group and Dye Durham

Assuming the 90 days horizon Sage Group PLC is expected to generate 0.25 times more return on investment than Dye Durham. However, Sage Group PLC is 3.97 times less risky than Dye Durham. It trades about -0.08 of its potential returns per unit of risk. Dye Durham Limited is currently generating about -0.12 per unit of risk. If you would invest  6,480  in Sage Group PLC on December 19, 2024 and sell it today you would lose (377.00) from holding Sage Group PLC or give up 5.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Sage Group PLC  vs.  Dye Durham Limited

Sage Group PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sage Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Sage Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dye Durham Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dye Durham Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sage Group and Dye Durham

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

The idea behind Sage Group PLC and Dye Durham Limited 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.