Correlation Between EQUITY GROUP and DIAMOND TRUST
Can any of the company-specific risk be diversified away by investing in both EQUITY GROUP and DIAMOND TRUST 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 EQUITY GROUP and DIAMOND TRUST into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EQUITY GROUP HOLDINGS and DIAMOND TRUST BANK, you can compare the effects of market volatilities on EQUITY GROUP and DIAMOND TRUST 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 EQUITY GROUP with a short position of DIAMOND TRUST. Check out your portfolio center. Please also check ongoing floating volatility patterns of EQUITY GROUP and DIAMOND TRUST.
Diversification Opportunities for EQUITY GROUP and DIAMOND TRUST
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EQUITY and DIAMOND is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding EQUITY GROUP HOLDINGS and DIAMOND TRUST BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIAMOND TRUST BANK and EQUITY GROUP 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 EQUITY GROUP HOLDINGS are associated (or correlated) with DIAMOND TRUST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIAMOND TRUST BANK has no effect on the direction of EQUITY GROUP i.e., EQUITY GROUP and DIAMOND TRUST go up and down completely randomly.
Pair Corralation between EQUITY GROUP and DIAMOND TRUST
Assuming the 90 days trading horizon EQUITY GROUP HOLDINGS is expected to under-perform the DIAMOND TRUST. In addition to that, EQUITY GROUP is 1.52 times more volatile than DIAMOND TRUST BANK. It trades about -0.12 of its total potential returns per unit of risk. DIAMOND TRUST BANK is currently generating about 0.17 per unit of volatility. 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 |
EQUITY GROUP HOLDINGS vs. DIAMOND TRUST BANK
Performance |
| Timeline |
| EQUITY GROUP HOLDINGS |
| DIAMOND TRUST BANK |
EQUITY GROUP and DIAMOND TRUST Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EQUITY GROUP and DIAMOND TRUST
The main advantage of trading using opposite EQUITY GROUP and DIAMOND TRUST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EQUITY GROUP position performs unexpectedly, DIAMOND TRUST 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 DIAMOND TRUST will offset losses from the drop in DIAMOND TRUST's long position.| 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 |
| 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 |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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