Correlation Between DBGR and DXGE
Can any of the company-specific risk be diversified away by investing in both DBGR and DXGE 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 DBGR and DXGE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DBGR and DXGE, you can compare the effects of market volatilities on DBGR and DXGE 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 DBGR with a short position of DXGE. Check out your portfolio center. Please also check ongoing floating volatility patterns of DBGR and DXGE.
Diversification Opportunities for DBGR and DXGE
Poor diversification
The 3 months correlation between DBGR and DXGE is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding DBGR and DXGE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DXGE and DBGR 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 DBGR are associated (or correlated) with DXGE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DXGE has no effect on the direction of DBGR i.e., DBGR and DXGE go up and down completely randomly.
Pair Corralation between DBGR and DXGE
Given the investment horizon of 90 days DBGR is expected to generate 1.64 times less return on investment than DXGE. In addition to that, DBGR is 1.39 times more volatile than DXGE. It trades about 0.05 of its total potential returns per unit of risk. DXGE is currently generating about 0.1 per unit of volatility. If you would invest 3,552 in DXGE on September 1, 2024 and sell it today you would earn a total of 90.00 from holding DXGE or generate 2.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DBGR vs. DXGE
Performance |
| Timeline |
| DBGR |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| DXGE |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
DBGR and DXGE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DBGR and DXGE
The main advantage of trading using opposite DBGR and DXGE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DBGR position performs unexpectedly, DXGE 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 DXGE will offset losses from the drop in DXGE's long position.The idea behind DBGR and DXGE 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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