Correlation Between Dana and ECARX Holdings

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

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

Diversification Opportunities for Dana and ECARX Holdings

0.2

Correlation Coefficient

Dana  ECARX Holdings

Modest diversification

The 3 months correlation between Dana and ECARX is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Dana Inc and ECARX Holdings Warrants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECARX Holdings Warrants and Dana 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 Dana Inc are associated (or correlated) with ECARX Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECARX Holdings Warrants has no effect on the direction of Dana i.e., Dana and ECARX Holdings go up and down completely randomly.

Pair Corralation between Dana and ECARX Holdings

Considering the 90-day investment horizon Dana is expected to generate 1.7 times less return on investment than ECARX Holdings. But when comparing it to its historical volatility, Dana Inc is 4.71 times less risky than ECARX Holdings. It trades about 0.44 of its potential returns per unit of risk. ECARX Holdings Warrants is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2.49  in ECARX Holdings Warrants on September 20, 2024 and sell it today you would earn a total of  0.51  from holding ECARX Holdings Warrants or generate 20.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	63.64%
Values	Daily Returns

Dana Inc  vs.  ECARX Holdings Warrants

Dana Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dana Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Dana displayed solid returns over the last few months and may actually be approaching a breakup point.

ECARX Holdings Warrants

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ECARX Holdings Warrants are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, ECARX Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dana and ECARX Holdings

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

The idea behind Dana Inc and ECARX Holdings Warrants 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.