Correlation Between DBS Group and Heritage Financial
Can any of the company-specific risk be diversified away by investing in both DBS Group and Heritage Financial 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 DBS Group and Heritage Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DBS Group Holdings and Heritage Financial, you can compare the effects of market volatilities on DBS Group and Heritage Financial 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 DBS Group with a short position of Heritage Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of DBS Group and Heritage Financial.
Diversification Opportunities for DBS Group and Heritage Financial
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between DBS and Heritage is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding DBS Group Holdings and Heritage Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Financial and DBS 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 DBS Group Holdings are associated (or correlated) with Heritage Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Financial has no effect on the direction of DBS Group i.e., DBS Group and Heritage Financial go up and down completely randomly.
Pair Corralation between DBS Group and Heritage Financial
Assuming the 90 days horizon DBS Group Holdings is expected to generate 0.58 times more return on investment than Heritage Financial. However, DBS Group Holdings is 1.73 times less risky than Heritage Financial. It trades about 0.15 of its potential returns per unit of risk. Heritage Financial is currently generating about 0.06 per unit of risk. If you would invest 11,714 in DBS Group Holdings on December 3, 2024 and sell it today you would earn a total of 1,943 from holding DBS Group Holdings or generate 16.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.77% |
| Values | Daily Returns |
DBS Group Holdings vs. Heritage Financial
Performance |
| Timeline |
| DBS Group Holdings |
| Heritage Financial |
DBS Group and Heritage Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DBS Group and Heritage Financial
The main advantage of trading using opposite DBS Group and Heritage Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DBS Group position performs unexpectedly, Heritage Financial 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 Heritage Financial will offset losses from the drop in Heritage Financial's long position.| DBS Group vs. KBC Groep NV | ||
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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