Correlation Between DIAMOND TRUST and EQUITY GROUP
Can any of the company-specific risk be diversified away by investing in both DIAMOND TRUST and EQUITY GROUP 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 DIAMOND TRUST and EQUITY GROUP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DIAMOND TRUST BANK and EQUITY GROUP HOLDINGS, you can compare the effects of market volatilities on DIAMOND TRUST and EQUITY GROUP 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 DIAMOND TRUST with a short position of EQUITY GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of DIAMOND TRUST and EQUITY GROUP.
Diversification Opportunities for DIAMOND TRUST and EQUITY GROUP
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DIAMOND and EQUITY is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding DIAMOND TRUST BANK and EQUITY GROUP HOLDINGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQUITY GROUP HOLDINGS and DIAMOND TRUST 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 DIAMOND TRUST BANK are associated (or correlated) with EQUITY GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EQUITY GROUP HOLDINGS has no effect on the direction of DIAMOND TRUST i.e., DIAMOND TRUST and EQUITY GROUP go up and down completely randomly.
Pair Corralation between DIAMOND TRUST and EQUITY GROUP
Assuming the 90 days trading horizon DIAMOND TRUST BANK is expected to generate 0.66 times more return on investment than EQUITY GROUP. However, DIAMOND TRUST BANK is 1.52 times less risky than EQUITY GROUP. It trades about 0.17 of its potential returns per unit of risk. EQUITY GROUP HOLDINGS is currently generating about -0.12 per unit of risk. If you would invest 5,300 in DIAMOND TRUST BANK on September 5, 2024 and sell it today you would earn a total of 175.00 from holding DIAMOND TRUST BANK or generate 3.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DIAMOND TRUST BANK vs. EQUITY GROUP HOLDINGS
Performance |
| Timeline |
| DIAMOND TRUST BANK |
| EQUITY GROUP HOLDINGS |
DIAMOND TRUST and EQUITY GROUP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DIAMOND TRUST and EQUITY GROUP
The main advantage of trading using opposite DIAMOND TRUST and EQUITY GROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DIAMOND TRUST position performs unexpectedly, EQUITY GROUP 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 EQUITY GROUP will offset losses from the drop in EQUITY GROUP's long position.| DIAMOND TRUST vs. EQUITY GROUP HOLDINGS | DIAMOND TRUST vs. BRITISH AMERICAN TOBACCO | DIAMOND TRUST vs. CO OPERATIVE BANK OF | DIAMOND TRUST vs. ABSA NEW GOLD |
| EQUITY GROUP vs. STANDARD CHARTERED BANK | EQUITY GROUP vs. CARBACID INVESTMENTS LTD | EQUITY GROUP vs. KENYA RE INSURANCE PORATION | EQUITY GROUP vs. CIC INSURANCE GROUP |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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