Correlation Between DCB MERCIAL and CRDB BANK
Can any of the company-specific risk be diversified away by investing in both DCB MERCIAL and CRDB BANK 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 DCB MERCIAL and CRDB BANK into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DCB MERCIAL BANK and CRDB BANK LTD, you can compare the effects of market volatilities on DCB MERCIAL and CRDB BANK 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 DCB MERCIAL with a short position of CRDB BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of DCB MERCIAL and CRDB BANK.
Diversification Opportunities for DCB MERCIAL and CRDB BANK
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between DCB and CRDB is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding DCB MERCIAL BANK and CRDB BANK LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CRDB BANK LTD and DCB MERCIAL 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 DCB MERCIAL BANK are associated (or correlated) with CRDB BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CRDB BANK LTD has no effect on the direction of DCB MERCIAL i.e., DCB MERCIAL and CRDB BANK go up and down completely randomly.
Pair Corralation between DCB MERCIAL and CRDB BANK
Assuming the 90 days trading horizon DCB MERCIAL BANK is expected to generate 2.12 times more return on investment than CRDB BANK. However, DCB MERCIAL is 2.12 times more volatile than CRDB BANK LTD. It trades about 0.13 of its potential returns per unit of risk. CRDB BANK LTD is currently generating about -0.05 per unit of risk. If you would invest 13,500 in DCB MERCIAL BANK on September 2, 2024 and sell it today you would earn a total of 2,000 from holding DCB MERCIAL BANK or generate 14.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DCB MERCIAL BANK vs. CRDB BANK LTD
Performance |
| Timeline |
| DCB MERCIAL BANK |
| CRDB BANK LTD |
DCB MERCIAL and CRDB BANK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DCB MERCIAL and CRDB BANK
The main advantage of trading using opposite DCB MERCIAL and CRDB BANK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DCB MERCIAL position performs unexpectedly, CRDB BANK 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 CRDB BANK will offset losses from the drop in CRDB BANK's long position.The idea behind DCB MERCIAL BANK and CRDB BANK LTD 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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