Correlation Between Derwent London and Polar Capital
Can any of the company-specific risk be diversified away by investing in both Derwent London and Polar Capital 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 Polar Capital 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 Polar Capital Technology, you can compare the effects of market volatilities on Derwent London and Polar Capital 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 Polar Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Derwent London and Polar Capital.
Diversification Opportunities for Derwent London and Polar Capital
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Derwent and Polar is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Derwent London PLC and Polar Capital Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polar Capital Technology 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 Polar Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polar Capital Technology has no effect on the direction of Derwent London i.e., Derwent London and Polar Capital go up and down completely randomly.
Pair Corralation between Derwent London and Polar Capital
Assuming the 90 days trading horizon Derwent London PLC is expected to under-perform the Polar Capital. In addition to that, Derwent London is 1.14 times more volatile than Polar Capital Technology. It trades about -0.01 of its total potential returns per unit of risk. Polar Capital Technology is currently generating about 0.1 per unit of volatility. If you would invest 24,000 in Polar Capital Technology on September 2, 2024 and sell it today you would earn a total of 9,600 from holding Polar Capital Technology or generate 40.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Derwent London PLC vs. Polar Capital Technology
Performance |
| Timeline |
| Derwent London PLC |
| Polar Capital Technology |
Derwent London and Polar Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Derwent London and Polar Capital
The main advantage of trading using opposite Derwent London and Polar Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Derwent London position performs unexpectedly, Polar Capital 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 Polar Capital will offset losses from the drop in Polar Capital's long position.| Derwent London vs. Baker Steel Resources | Derwent London vs. United States Steel | Derwent London vs. Foresight Environmental Infrastructure | Derwent London vs. JLEN Environmental Assets |
| Polar Capital vs. Toyota Motor Corp | Polar Capital vs. SoftBank Group Corp | Polar Capital vs. OTP Bank Nyrt | Polar Capital vs. Las Vegas Sands |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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