Correlation Between DBT SA and Archos
Can any of the company-specific risk be diversified away by investing in both DBT SA and Archos 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 DBT SA and Archos into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DBT SA and Archos, you can compare the effects of market volatilities on DBT SA and Archos 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 DBT SA with a short position of Archos. Check out your portfolio center. Please also check ongoing floating volatility patterns of DBT SA and Archos.
Diversification Opportunities for DBT SA and Archos
Weak diversification
The 3 months correlation between DBT and Archos is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding DBT SA and Archos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archos and DBT SA 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 DBT SA are associated (or correlated) with Archos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archos has no effect on the direction of DBT SA i.e., DBT SA and Archos go up and down completely randomly.
Pair Corralation between DBT SA and Archos
Assuming the 90 days trading horizon DBT SA is expected to under-perform the Archos. But the stock apears to be less risky and, when comparing its historical volatility, DBT SA is 1.02 times less risky than Archos. The stock trades about -0.03 of its potential returns per unit of risk. The Archos is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 1,407 in Archos on September 3, 2024 and sell it today you would lose (1,395) from holding Archos or give up 99.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
DBT SA vs. Archos
Performance |
| Timeline |
| DBT SA |
| Archos |
DBT SA and Archos Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DBT SA and Archos
The main advantage of trading using opposite DBT SA and Archos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DBT SA position performs unexpectedly, Archos 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 Archos will offset losses from the drop in Archos' long position.The idea behind DBT SA and Archos 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.Check out your portfolio center.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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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