Correlation Between DB Financial and BIT Computer

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

By analyzing existing cross correlation between DB Financial Investment and BIT Computer Co, you can compare the effects of market volatilities on DB Financial and BIT Computer 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 DB Financial with a short position of BIT Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of DB Financial and BIT Computer.

Diversification Opportunities for DB Financial and BIT Computer

0.65

Correlation Coefficient

DB Financial  BIT Computer

Poor diversification

The 3 months correlation between 016610 and BIT is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding DB Financial Investment and BIT Computer Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BIT Computer and DB Financial 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 DB Financial Investment are associated (or correlated) with BIT Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BIT Computer has no effect on the direction of DB Financial i.e., DB Financial and BIT Computer go up and down completely randomly.

Pair Corralation between DB Financial and BIT Computer

Assuming the 90 days trading horizon DB Financial Investment is expected to under-perform the BIT Computer. But the stock apears to be less risky and, when comparing its historical volatility, DB Financial Investment is 1.12 times less risky than BIT Computer. The stock trades about -0.05 of its potential returns per unit of risk. The BIT Computer Co is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  516,357  in BIT Computer Co on September 29, 2024 and sell it today you would lose (31,357) from holding BIT Computer Co or give up 6.07% of portfolio value over 90 days.

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

DB Financial Investment  vs.  BIT Computer Co

DB Financial Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DB Financial Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, DB Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BIT Computer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BIT Computer Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BIT Computer is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with DB Financial and BIT Computer

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

The idea behind DB Financial Investment and BIT Computer Co 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.