Correlation Between POT and DIC Holdings

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Can any of the company-specific risk be diversified away by investing in both POT and DIC Holdings 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 POT and DIC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PostTelecommunication Equipment and DIC Holdings Construction, you can compare the effects of market volatilities on POT and DIC Holdings 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 POT with a short position of DIC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of POT and DIC Holdings.

Diversification Opportunities for POT and DIC Holdings

-0.29
  Correlation Coefficient

Very good diversification

The 3 months correlation between POT and DIC is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding PostTelecommunication Equipmen and DIC Holdings Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIC Holdings Construction and POT 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 PostTelecommunication Equipment are associated (or correlated) with DIC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIC Holdings Construction has no effect on the direction of POT i.e., POT and DIC Holdings go up and down completely randomly.

Pair Corralation between POT and DIC Holdings

Assuming the 90 days trading horizon PostTelecommunication Equipment is expected to generate 1.54 times more return on investment than DIC Holdings. However, POT is 1.54 times more volatile than DIC Holdings Construction. It trades about 0.01 of its potential returns per unit of risk. DIC Holdings Construction is currently generating about -0.2 per unit of risk. If you would invest  1,560,000  in PostTelecommunication Equipment on October 20, 2024 and sell it today you would lose (10,000) from holding PostTelecommunication Equipment or give up 0.64% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy54.55%
ValuesDaily Returns

PostTelecommunication Equipmen  vs.  DIC Holdings Construction

 Performance 
       Timeline  
PostTelecommunication 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days PostTelecommunication Equipment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.
DIC Holdings Construction 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in DIC Holdings Construction are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, DIC Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

POT and DIC Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with POT and DIC Holdings

The main advantage of trading using opposite POT and DIC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POT position performs unexpectedly, DIC Holdings 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 DIC Holdings will offset losses from the drop in DIC Holdings' long position.
The idea behind PostTelecommunication Equipment and DIC Holdings Construction 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.
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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