Correlation Between Dental Public and Asefa Public

Can any of the company-specific risk be diversified away by investing in both Dental Public and Asefa Public 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 Dental Public and Asefa Public into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dental Public and Asefa Public, you can compare the effects of market volatilities on Dental Public and Asefa Public 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 Dental Public with a short position of Asefa Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dental Public and Asefa Public.

Diversification Opportunities for Dental Public and Asefa Public

-0.07

Correlation Coefficient

Dental Public  Asefa Public

Good diversification

The 3 months correlation between Dental and Asefa is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Dental Public and Asefa Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asefa Public and Dental Public 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 Dental Public are associated (or correlated) with Asefa Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asefa Public has no effect on the direction of Dental Public i.e., Dental Public and Asefa Public go up and down completely randomly.

Pair Corralation between Dental Public and Asefa Public

Given the investment horizon of 90 days Dental Public is expected to under-perform the Asefa Public. In addition to that, Dental Public is 2.3 times more volatile than Asefa Public. It trades about -0.15 of its total potential returns per unit of risk. Asefa Public is currently generating about -0.13 per unit of volatility. If you would invest  378.00  in Asefa Public on February 27, 2024 and sell it today you would lose (22.00) from holding Asefa Public or give up 5.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Dental Public  vs.  Asefa Public

Dental Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dental Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Asefa Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asefa Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Dental Public and Asefa Public

The main advantage of trading using opposite Dental Public and Asefa Public positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dental Public position performs unexpectedly, Asefa Public 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 Asefa Public will offset losses from the drop in Asefa Public's long position.

The idea behind Dental Public and Asefa Public 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.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.