Correlation Between DIA and GRIN
Can any of the company-specific risk be diversified away by investing in both DIA and GRIN 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 DIA and GRIN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DIA and GRIN, you can compare the effects of market volatilities on DIA and GRIN 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 DIA with a short position of GRIN. Check out your portfolio center. Please also check ongoing floating volatility patterns of DIA and GRIN.
Diversification Opportunities for DIA and GRIN
Very poor diversification
The 3 months correlation between DIA and GRIN is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding DIA and GRIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GRIN and DIA 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 DIA are associated (or correlated) with GRIN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GRIN has no effect on the direction of DIA i.e., DIA and GRIN go up and down completely randomly.
Pair Corralation between DIA and GRIN
Assuming the 90 days trading horizon DIA is expected to under-perform the GRIN. But the crypto coin apears to be less risky and, when comparing its historical volatility, DIA is 1.31 times less risky than GRIN. The crypto coin trades about -0.37 of its potential returns per unit of risk. The GRIN is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest 2.95 in GRIN on November 8, 2024 and sell it today you would lose (0.76) from holding GRIN or give up 25.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
DIA vs. GRIN
Performance |
| Timeline |
| DIA |
| GRIN |
DIA and GRIN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DIA and GRIN
The main advantage of trading using opposite DIA and GRIN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DIA position performs unexpectedly, GRIN 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 GRIN will offset losses from the drop in GRIN's long position.The idea behind DIA and GRIN 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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