Correlation Between POSBO UNSPADRS20YC1 and DISTRICT METALS

Can any of the company-specific risk be diversified away by investing in both POSBO UNSPADRS20YC1 and DISTRICT METALS 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 POSBO UNSPADRS20YC1 and DISTRICT METALS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between POSBO UNSPADRS20YC1 and DISTRICT METALS, you can compare the effects of market volatilities on POSBO UNSPADRS20YC1 and DISTRICT METALS 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 POSBO UNSPADRS20YC1 with a short position of DISTRICT METALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSBO UNSPADRS20YC1 and DISTRICT METALS.

Diversification Opportunities for POSBO UNSPADRS20YC1 and DISTRICT METALS

0.73

Correlation Coefficient

POSBO UNSPADRS20YC1  DISTRICT METALS

Poor diversification

The 3 months correlation between POSBO and DISTRICT is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding POSBO UNSPADRS20YC1 and DISTRICT METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DISTRICT METALS and POSBO UNSPADRS20YC1 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 POSBO UNSPADRS20YC1 are associated (or correlated) with DISTRICT METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DISTRICT METALS has no effect on the direction of POSBO UNSPADRS20YC1 i.e., POSBO UNSPADRS20YC1 and DISTRICT METALS go up and down completely randomly.

Pair Corralation between POSBO UNSPADRS20YC1 and DISTRICT METALS

Assuming the 90 days trading horizon POSBO UNSPADRS20YC1 is expected to generate 2.34 times less return on investment than DISTRICT METALS. But when comparing it to its historical volatility, POSBO UNSPADRS20YC1 is 2.04 times less risky than DISTRICT METALS. It trades about 0.12 of its potential returns per unit of risk. DISTRICT METALS is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  17.00  in DISTRICT METALS on September 15, 2024 and sell it today you would earn a total of  7.00  from holding DISTRICT METALS or generate 41.18% return on investment over 90 days.

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

POSBO UNSPADRS20YC1  vs.  DISTRICT METALS

POSBO UNSPADRS20YC1

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in POSBO UNSPADRS20YC1 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, POSBO UNSPADRS20YC1 reported solid returns over the last few months and may actually be approaching a breakup point.

DISTRICT METALS

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DISTRICT METALS are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DISTRICT METALS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with POSBO UNSPADRS20YC1 and DISTRICT METALS

The main advantage of trading using opposite POSBO UNSPADRS20YC1 and DISTRICT METALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSBO UNSPADRS20YC1 position performs unexpectedly, DISTRICT METALS 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 DISTRICT METALS will offset losses from the drop in DISTRICT METALS's long position.

The idea behind POSBO UNSPADRS20YC1 and DISTRICT METALS 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.