Correlation Between Derwent London and Canadian General
Can any of the company-specific risk be diversified away by investing in both Derwent London and Canadian General 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 Derwent London and Canadian General into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Derwent London PLC and Canadian General Investments, you can compare the effects of market volatilities on Derwent London and Canadian General 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 Derwent London with a short position of Canadian General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Derwent London and Canadian General.
Diversification Opportunities for Derwent London and Canadian General
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Derwent and Canadian is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Derwent London PLC and Canadian General Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian General Inv and Derwent London 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 Derwent London PLC are associated (or correlated) with Canadian General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian General Inv has no effect on the direction of Derwent London i.e., Derwent London and Canadian General go up and down completely randomly.
Pair Corralation between Derwent London and Canadian General
Assuming the 90 days trading horizon Derwent London PLC is expected to under-perform the Canadian General. In addition to that, Derwent London is 1.26 times more volatile than Canadian General Investments. It trades about -0.03 of its total potential returns per unit of risk. Canadian General Investments is currently generating about 0.04 per unit of volatility. If you would invest 186,697 in Canadian General Investments on November 2, 2024 and sell it today you would earn a total of 46,303 from holding Canadian General Investments or generate 24.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Derwent London PLC vs. Canadian General Investments
Performance |
| Timeline |
| Derwent London PLC |
| Canadian General Inv |
Derwent London and Canadian General Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Derwent London and Canadian General
The main advantage of trading using opposite Derwent London and Canadian General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Derwent London position performs unexpectedly, Canadian General 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 Canadian General will offset losses from the drop in Canadian General's long position.| Derwent London vs. Vienna Insurance Group | Derwent London vs. Qurate Retail Series | Derwent London vs. United Utilities Group | Derwent London vs. Costco Wholesale Corp |
| Canadian General vs. Air Products Chemicals | Canadian General vs. Central Asia Metals | Canadian General vs. Synthomer plc | Canadian General vs. Fulcrum Metals PLC |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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