Correlation Between DR and Cultural Investment

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

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

Diversification Opportunities for DR and Cultural Investment

0.69

Correlation Coefficient

DR  Cultural Investment

Poor diversification

The 3 months correlation between DR and Cultural is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding DR Limited and Cultural Investment Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cultural Investment and DR 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 DR Limited are associated (or correlated) with Cultural Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cultural Investment has no effect on the direction of DR i.e., DR and Cultural Investment go up and down completely randomly.

Pair Corralation between DR and Cultural Investment

Assuming the 90 days trading horizon DR Limited is expected to generate 1.18 times more return on investment than Cultural Investment. However, DR is 1.18 times more volatile than Cultural Investment Holdings. It trades about 0.21 of its potential returns per unit of risk. Cultural Investment Holdings is currently generating about 0.15 per unit of risk. If you would invest  1,747  in DR Limited on September 14, 2024 and sell it today you would earn a total of  854.00  from holding DR Limited or generate 48.88% return on investment over 90 days.

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

DR Limited  vs.  Cultural Investment Holdings

DR Limited

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DR Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DR sustained solid returns over the last few months and may actually be approaching a breakup point.

Cultural Investment

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cultural Investment Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cultural Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DR and Cultural Investment

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

The idea behind DR Limited and Cultural Investment Holdings 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.