Can any of the company-specific risk be diversified away by investing in both DIRTT Environmental and Cogeco 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 DIRTT Environmental and Cogeco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DIRTT Environmental Solutions and Cogeco Inc, you can compare the effects of market volatilities on DIRTT Environmental and Cogeco 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 DIRTT Environmental with a short position of Cogeco. Check out your portfolio center. Please also check ongoing floating volatility patterns of DIRTT Environmental and Cogeco.
Diversification Opportunities for DIRTT Environmental and Cogeco
The 3 months correlation between DIRTT and Cogeco is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding DIRTT Environmental Solutions and Cogeco Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogeco Inc and DIRTT Environmental 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 DIRTT Environmental Solutions are associated (or correlated) with Cogeco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogeco Inc has no effect on the direction of DIRTT Environmental i.e., DIRTT Environmental and Cogeco go up and down completely randomly.
Pair Corralation between DIRTT Environmental and Cogeco
Assuming the 90 days trading horizon DIRTT Environmental Solutions is expected to under-perform the Cogeco. In addition to that, DIRTT Environmental is 1.22 times more volatile than Cogeco Inc. It trades about -0.47 of its total potential returns per unit of risk. Cogeco Inc is currently generating about -0.11 per unit of volatility. If you would invest 5,387 in Cogeco Inc on March 6, 2024 and sell it today you would lose (286.00) from holding Cogeco Inc or give up 5.31% of portfolio value over 90 days.
Over the last 90 days DIRTT Environmental Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, DIRTT Environmental is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
Over the last 90 days Cogeco Inc 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 July 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.