Correlation Between Derichebourg and BigBen Interactive

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

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

Diversification Opportunities for Derichebourg and BigBen Interactive

0.57

Correlation Coefficient

Derichebourg  BigBen Interactive

Very weak diversification

The 3 months correlation between Derichebourg and BigBen is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Derichebourg and BigBen Interactive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BigBen Interactive and Derichebourg 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 Derichebourg are associated (or correlated) with BigBen Interactive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BigBen Interactive has no effect on the direction of Derichebourg i.e., Derichebourg and BigBen Interactive go up and down completely randomly.

Pair Corralation between Derichebourg and BigBen Interactive

Assuming the 90 days trading horizon Derichebourg is expected to generate 1.04 times more return on investment than BigBen Interactive. However, Derichebourg is 1.04 times more volatile than BigBen Interactive. It trades about -0.07 of its potential returns per unit of risk. BigBen Interactive is currently generating about -0.28 per unit of risk. If you would invest  509.00  in Derichebourg on September 2, 2024 and sell it today you would lose (52.00) from holding Derichebourg or give up 10.22% of portfolio value over 90 days.

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

Derichebourg  vs.  BigBen Interactive

Derichebourg

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Derichebourg has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

BigBen Interactive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BigBen Interactive has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Derichebourg and BigBen Interactive

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

The idea behind Derichebourg and BigBen Interactive 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.