Correlation Between Dupont De and CMT
Can any of the company-specific risk be diversified away by investing in both Dupont De and CMT 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 Dupont De and CMT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dupont De Nemours and CMT, you can compare the effects of market volatilities on Dupont De and CMT 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 Dupont De with a short position of CMT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and CMT.
Diversification Opportunities for Dupont De and CMT
Good diversification
The 3 months correlation between Dupont and CMT is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and CMT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMT and Dupont De 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 Dupont De Nemours are associated (or correlated) with CMT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMT has no effect on the direction of Dupont De i.e., Dupont De and CMT go up and down completely randomly.
Pair Corralation between Dupont De and CMT
Allowing for the 90-day total investment horizon Dupont De is expected to generate 35.84 times less return on investment than CMT. But when comparing it to its historical volatility, Dupont De Nemours is 2.76 times less risky than CMT. It trades about 0.02 of its potential returns per unit of risk. CMT is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 0.58 in CMT on August 30, 2024 and sell it today you would earn a total of 0.18 from holding CMT or generate 30.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dupont De Nemours vs. CMT
Performance |
| Timeline |
| Dupont De Nemours |
| CMT |
Dupont De and CMT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dupont De and CMT
The main advantage of trading using opposite Dupont De and CMT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De position performs unexpectedly, CMT 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 CMT will offset losses from the drop in CMT's long position.| Dupont De vs. Olin Corporation | Dupont De vs. Cabot | Dupont De vs. Kronos Worldwide | Dupont De vs. LyondellBasell Industries NV |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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