Correlation Between Definity Financial and North American
Can any of the company-specific risk be diversified away by investing in both Definity Financial and North American 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 Definity Financial and North American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Definity Financial Corp and North American Construction, you can compare the effects of market volatilities on Definity Financial and North American 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 Definity Financial with a short position of North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Definity Financial and North American.
Diversification Opportunities for Definity Financial and North American
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Definity and North is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Definity Financial Corp and North American Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Const and Definity Financial 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 Definity Financial Corp are associated (or correlated) with North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Const has no effect on the direction of Definity Financial i.e., Definity Financial and North American go up and down completely randomly.
Pair Corralation between Definity Financial and North American
Assuming the 90 days trading horizon Definity Financial Corp is expected to generate 0.72 times more return on investment than North American. However, Definity Financial Corp is 1.38 times less risky than North American. It trades about 0.34 of its potential returns per unit of risk. North American Construction is currently generating about 0.16 per unit of risk. If you would invest 5,373 in Definity Financial Corp on September 1, 2024 and sell it today you would earn a total of 480.00 from holding Definity Financial Corp or generate 8.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Definity Financial Corp vs. North American Construction
Performance |
| Timeline |
| Definity Financial Corp |
| North American Const |
Definity Financial and North American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Definity Financial and North American
The main advantage of trading using opposite Definity Financial and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Definity Financial position performs unexpectedly, North American 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 North American will offset losses from the drop in North American's long position.| Definity Financial vs. Trisura Group | Definity Financial vs. Pet Valu Holdings | Definity Financial vs. Intact Financial | Definity Financial vs. Topaz Energy Corp |
| North American vs. PHX Energy Services | North American vs. CES Energy Solutions | North American vs. Total Energy Services | North American vs. Pason Systems |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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