Correlation Between DB Financial and MegaStudy

Can any of the company-specific risk be diversified away by investing in both DB Financial and MegaStudy 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 MegaStudy 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 MegaStudy Co, you can compare the effects of market volatilities on DB Financial and MegaStudy 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 MegaStudy. Check out your portfolio center. Please also check ongoing floating volatility patterns of DB Financial and MegaStudy.

Diversification Opportunities for DB Financial and MegaStudy

-0.09

Correlation Coefficient

DB Financial  MegaStudy

Good diversification

The 3 months correlation between 016610 and MegaStudy is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding DB Financial Investment and MegaStudy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MegaStudy 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 MegaStudy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MegaStudy has no effect on the direction of DB Financial i.e., DB Financial and MegaStudy go up and down completely randomly.

Pair Corralation between DB Financial and MegaStudy

Assuming the 90 days trading horizon DB Financial Investment is expected to generate 3.18 times more return on investment than MegaStudy. However, DB Financial is 3.18 times more volatile than MegaStudy Co. It trades about 0.06 of its potential returns per unit of risk. MegaStudy Co is currently generating about 0.1 per unit of risk. If you would invest  515,000  in DB Financial Investment on September 22, 2024 and sell it today you would earn a total of  12,000  from holding DB Financial Investment or generate 2.33% return on investment over 90 days.

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

DB Financial Investment  vs.  MegaStudy 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 latest weak 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.

MegaStudy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MegaStudy Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, MegaStudy 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 MegaStudy

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

The idea behind DB Financial Investment and MegaStudy 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.