Correlation Between DATAGROUP and Data3

Can any of the company-specific risk be diversified away by investing in both DATAGROUP and Data3 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 DATAGROUP and Data3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DATAGROUP SE and Data3 Limited, you can compare the effects of market volatilities on DATAGROUP and Data3 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 DATAGROUP with a short position of Data3. Check out your portfolio center. Please also check ongoing floating volatility patterns of DATAGROUP and Data3.

Diversification Opportunities for DATAGROUP and Data3

0.23

Correlation Coefficient

DATAGROUP  Data3

Modest diversification

The 3 months correlation between DATAGROUP and Data3 is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding DATAGROUP SE and Data3 Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Data3 Limited and DATAGROUP 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 DATAGROUP SE are associated (or correlated) with Data3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Data3 Limited has no effect on the direction of DATAGROUP i.e., DATAGROUP and Data3 go up and down completely randomly.

Pair Corralation between DATAGROUP and Data3

Assuming the 90 days trading horizon DATAGROUP SE is expected to under-perform the Data3. But the stock apears to be less risky and, when comparing its historical volatility, DATAGROUP SE is 1.17 times less risky than Data3. The stock trades about -0.02 of its potential returns per unit of risk. The Data3 Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  373.00  in Data3 Limited on September 4, 2024 and sell it today you would earn a total of  99.00  from holding Data3 Limited or generate 26.54% return on investment over 90 days.

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

DATAGROUP SE  vs.  Data3 Limited

DATAGROUP SE

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DATAGROUP SE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, DATAGROUP unveiled solid returns over the last few months and may actually be approaching a breakup point.

Data3 Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Data3 Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Data3 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with DATAGROUP and Data3

The main advantage of trading using opposite DATAGROUP and Data3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DATAGROUP position performs unexpectedly, Data3 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 Data3 will offset losses from the drop in Data3's long position.

The idea behind DATAGROUP SE and Data3 Limited 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.