Correlation Between Doman Building and Guru Organic

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

By analyzing existing cross correlation between Doman Building Materials and Guru Organic Energy, you can compare the effects of market volatilities on Doman Building and Guru Organic 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 Doman Building with a short position of Guru Organic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Doman Building and Guru Organic.

Diversification Opportunities for Doman Building and Guru Organic

-0.39

Correlation Coefficient

Doman Building  Guru Organic

Very good diversification

The 3 months correlation between Doman and Guru is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Doman Building Materials and Guru Organic Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guru Organic Energy and Doman Building 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 Doman Building Materials are associated (or correlated) with Guru Organic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guru Organic Energy has no effect on the direction of Doman Building i.e., Doman Building and Guru Organic go up and down completely randomly.

Pair Corralation between Doman Building and Guru Organic

Assuming the 90 days trading horizon Doman Building Materials is expected to generate 0.57 times more return on investment than Guru Organic. However, Doman Building Materials is 1.76 times less risky than Guru Organic. It trades about 0.2 of its potential returns per unit of risk. Guru Organic Energy is currently generating about -0.05 per unit of risk. If you would invest  736.00  in Doman Building Materials on September 14, 2024 and sell it today you would earn a total of  195.00  from holding Doman Building Materials or generate 26.49% return on investment over 90 days.

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

Doman Building Materials  vs.  Guru Organic Energy

Doman Building Materials

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Doman Building Materials are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Doman Building displayed solid returns over the last few months and may actually be approaching a breakup point.

Guru Organic Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guru Organic Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Doman Building and Guru Organic

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

The idea behind Doman Building Materials and Guru Organic Energy 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.