Correlation Between Quantum and DPCM Capital

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

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

Diversification Opportunities for Quantum and DPCM Capital

0.44

Correlation Coefficient

Quantum  DPCM Capital

Very weak diversification

The 3 months correlation between Quantum and DPCM is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Quantum and DPCM Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DPCM Capital and Quantum 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 Quantum are associated (or correlated) with DPCM Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DPCM Capital has no effect on the direction of Quantum i.e., Quantum and DPCM Capital go up and down completely randomly.

Pair Corralation between Quantum and DPCM Capital

Given the investment horizon of 90 days Quantum is expected to generate 1.83 times more return on investment than DPCM Capital. However, Quantum is 1.83 times more volatile than DPCM Capital. It trades about 0.23 of its potential returns per unit of risk. DPCM Capital is currently generating about -0.35 per unit of risk. If you would invest  40.00  in Quantum on February 23, 2024 and sell it today you would earn a total of  11.00  from holding Quantum or generate 27.5% return on investment over 90 days.

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

Quantum  vs.  DPCM Capital

Quantum

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Quantum are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Quantum displayed solid returns over the last few months and may actually be approaching a breakup point.

DPCM Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DPCM Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Quantum and DPCM Capital

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

The idea behind Quantum and DPCM Capital 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.