Correlation Between DexCom and Mitie Group

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

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

Diversification Opportunities for DexCom and Mitie Group

0.36

Correlation Coefficient

DexCom  Mitie Group

Weak diversification

The 3 months correlation between DexCom and Mitie is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding DexCom Inc and Mitie Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitie Group PLC and DexCom 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 DexCom Inc are associated (or correlated) with Mitie Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitie Group PLC has no effect on the direction of DexCom i.e., DexCom and Mitie Group go up and down completely randomly.

Pair Corralation between DexCom and Mitie Group

Assuming the 90 days horizon DexCom is expected to generate 2.21 times less return on investment than Mitie Group. But when comparing it to its historical volatility, DexCom Inc is 1.44 times less risky than Mitie Group. It trades about 0.09 of its potential returns per unit of risk. Mitie Group PLC is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  109,800  in Mitie Group PLC on February 19, 2024 and sell it today you would earn a total of  30,550  from holding Mitie Group PLC or generate 27.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

DexCom Inc  vs.  Mitie Group PLC

DexCom Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DexCom Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DexCom may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Mitie Group PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mitie Group PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Mitie Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DexCom and Mitie Group

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

The idea behind DexCom Inc and Mitie 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.