Correlation Between Timken and DHC Acquisition

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

By analyzing existing cross correlation between Timken Company and DHC Acquisition Corp, you can compare the effects of market volatilities on Timken and DHC Acquisition 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 Timken with a short position of DHC Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timken and DHC Acquisition.

Diversification Opportunities for Timken and DHC Acquisition

-0.64

Correlation Coefficient

Timken  DHC Acquisition

Excellent diversification

The 3 months correlation between Timken and DHC is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Timken Company and DHC Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DHC Acquisition Corp and Timken 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 Timken Company are associated (or correlated) with DHC Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DHC Acquisition Corp has no effect on the direction of Timken i.e., Timken and DHC Acquisition go up and down completely randomly.

Pair Corralation between Timken and DHC Acquisition

If you would invest  1,025  in DHC Acquisition Corp on September 24, 2024 and sell it today you would earn a total of  0.00  from holding DHC Acquisition Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	4.76%
Values	Daily Returns

Timken Company  vs.  DHC Acquisition Corp

Timken Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timken Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's forward-looking signals remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

DHC Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DHC Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, DHC Acquisition is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Timken and DHC Acquisition

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

The idea behind Timken Company and DHC Acquisition Corp 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.