Correlation Between DG Innovate and Gerresheimer
Can any of the company-specific risk be diversified away by investing in both DG Innovate and Gerresheimer 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 DG Innovate and Gerresheimer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DG Innovate PLC and Gerresheimer AG, you can compare the effects of market volatilities on DG Innovate and Gerresheimer 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 DG Innovate with a short position of Gerresheimer. Check out your portfolio center. Please also check ongoing floating volatility patterns of DG Innovate and Gerresheimer.
Diversification Opportunities for DG Innovate and Gerresheimer
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DGI and Gerresheimer is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding DG Innovate PLC and Gerresheimer AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gerresheimer AG and DG Innovate 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 DG Innovate PLC are associated (or correlated) with Gerresheimer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gerresheimer AG has no effect on the direction of DG Innovate i.e., DG Innovate and Gerresheimer go up and down completely randomly.
Pair Corralation between DG Innovate and Gerresheimer
Assuming the 90 days trading horizon DG Innovate PLC is expected to generate 3.69 times more return on investment than Gerresheimer. However, DG Innovate is 3.69 times more volatile than Gerresheimer AG. It trades about 0.24 of its potential returns per unit of risk. Gerresheimer AG is currently generating about -0.26 per unit of risk. If you would invest 6.30 in DG Innovate PLC on August 28, 2024 and sell it today you would earn a total of 2.10 from holding DG Innovate PLC or generate 33.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DG Innovate PLC vs. Gerresheimer AG
Performance |
| Timeline |
| DG Innovate PLC |
| Gerresheimer AG |
DG Innovate and Gerresheimer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DG Innovate and Gerresheimer
The main advantage of trading using opposite DG Innovate and Gerresheimer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DG Innovate position performs unexpectedly, Gerresheimer 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 Gerresheimer will offset losses from the drop in Gerresheimer's long position.| DG Innovate vs. Supermarket Income REIT | DG Innovate vs. Associated British Foods | DG Innovate vs. Teradata Corp | DG Innovate vs. Vitec Software Group |
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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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