Correlation Between SQLI SA and DLSI
Can any of the company-specific risk be diversified away by investing in both SQLI SA and DLSI 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 SQLI SA and DLSI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SQLI SA and DLSI, you can compare the effects of market volatilities on SQLI SA and DLSI 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 SQLI SA with a short position of DLSI. Check out your portfolio center. Please also check ongoing floating volatility patterns of SQLI SA and DLSI.
Diversification Opportunities for SQLI SA and DLSI
Pay attention - limited upside
The 3 months correlation between SQLI and DLSI is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding SQLI SA and DLSI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DLSI and SQLI SA 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 SQLI SA are associated (or correlated) with DLSI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DLSI has no effect on the direction of SQLI SA i.e., SQLI SA and DLSI go up and down completely randomly.
Pair Corralation between SQLI SA and DLSI
Assuming the 90 days trading horizon SQLI SA is expected to generate 384.5 times less return on investment than DLSI. But when comparing it to its historical volatility, SQLI SA is 4.2 times less risky than DLSI. It trades about 0.0 of its potential returns per unit of risk. DLSI is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,220 in DLSI on September 1, 2024 and sell it today you would earn a total of 40.00 from holding DLSI or generate 3.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SQLI SA vs. DLSI
Performance |
| Timeline |
| SQLI SA |
| DLSI |
SQLI SA and DLSI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SQLI SA and DLSI
The main advantage of trading using opposite SQLI SA and DLSI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SQLI SA position performs unexpectedly, DLSI 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 DLSI will offset losses from the drop in DLSI's long position.| SQLI SA vs. Sword Group SE | SQLI SA vs. Neurones | SQLI SA vs. Sopra Steria Group | SQLI SA vs. Linedata Services SA |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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