Correlation Between Sui and DGD
Can any of the company-specific risk be diversified away by investing in both Sui and DGD 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 Sui and DGD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sui and DGD, you can compare the effects of market volatilities on Sui and DGD 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 Sui with a short position of DGD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sui and DGD.
Diversification Opportunities for Sui and DGD
Almost no diversification
The 3 months correlation between Sui and DGD is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Sui and DGD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DGD and Sui 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 Sui are associated (or correlated) with DGD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DGD has no effect on the direction of Sui i.e., Sui and DGD go up and down completely randomly.
Pair Corralation between Sui and DGD
Assuming the 90 days trading horizon Sui is expected to generate 1.39 times less return on investment than DGD. But when comparing it to its historical volatility, Sui is 2.34 times less risky than DGD. It trades about 0.15 of its potential returns per unit of risk. DGD is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 12,883 in DGD on August 30, 2024 and sell it today you would earn a total of 92,910 from holding DGD or generate 721.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 46.15% |
| Values | Daily Returns |
Sui vs. DGD
Performance |
| Timeline |
| Sui |
| DGD |
Sui and DGD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sui and DGD
The main advantage of trading using opposite Sui and DGD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sui position performs unexpectedly, DGD 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 DGD will offset losses from the drop in DGD's long position.The idea behind Sui and DGD 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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