Correlation Between Mazda and Dowlais Group
Can any of the company-specific risk be diversified away by investing in both Mazda and Dowlais 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 Mazda and Dowlais Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mazda Motor and Dowlais Group plc, you can compare the effects of market volatilities on Mazda and Dowlais 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 Mazda with a short position of Dowlais Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mazda and Dowlais Group.
Diversification Opportunities for Mazda and Dowlais Group
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mazda and Dowlais is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Mazda Motor and Dowlais Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dowlais Group plc and Mazda 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 Mazda Motor are associated (or correlated) with Dowlais Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dowlais Group plc has no effect on the direction of Mazda i.e., Mazda and Dowlais Group go up and down completely randomly.
Pair Corralation between Mazda and Dowlais Group
Assuming the 90 days horizon Mazda Motor is expected to under-perform the Dowlais Group. In addition to that, Mazda is 1.41 times more volatile than Dowlais Group plc. It trades about -0.15 of its total potential returns per unit of risk. Dowlais Group plc is currently generating about 0.07 per unit of volatility. If you would invest 67.00 in Dowlais Group plc on September 1, 2024 and sell it today you would earn a total of 2.00 from holding Dowlais Group plc or generate 2.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mazda Motor vs. Dowlais Group plc
Performance |
| Timeline |
| Mazda Motor |
| Dowlais Group plc |
Mazda and Dowlais Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mazda and Dowlais Group
The main advantage of trading using opposite Mazda and Dowlais Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mazda position performs unexpectedly, Dowlais 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 Dowlais Group will offset losses from the drop in Dowlais Group's long position.The idea behind Mazda Motor and Dowlais Group plc 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.| Dowlais Group vs. Highway Holdings Limited | Dowlais Group vs. Inflection Point Acquisition | Dowlais Group vs. Eldorado Gold Corp | Dowlais Group vs. Western Acquisition Ventures |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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