Correlation Between DBS Group and Cornerstone Financial

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

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

Diversification Opportunities for DBS Group and Cornerstone Financial

0.62

Correlation Coefficient

DBS Group  Cornerstone Financial

Poor diversification

The 3 months correlation between DBS and Cornerstone is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding DBS Group Holdings and Cornerstone Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cornerstone Financial and DBS Group 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 DBS Group Holdings are associated (or correlated) with Cornerstone Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cornerstone Financial has no effect on the direction of DBS Group i.e., DBS Group and Cornerstone Financial go up and down completely randomly.

Pair Corralation between DBS Group and Cornerstone Financial

Assuming the 90 days horizon DBS Group is expected to generate 1.45 times less return on investment than Cornerstone Financial. But when comparing it to its historical volatility, DBS Group Holdings is 2.24 times less risky than Cornerstone Financial. It trades about 0.15 of its potential returns per unit of risk. Cornerstone Financial is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  711.00  in Cornerstone Financial on September 5, 2024 and sell it today you would earn a total of  121.00  from holding Cornerstone Financial or generate 17.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	50.4%
Values	Daily Returns

DBS Group Holdings  vs.  Cornerstone Financial

DBS Group Holdings

Risk-Adjusted Performance

14 of 100

Good

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

Cornerstone Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cornerstone Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Cornerstone Financial is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with DBS Group and Cornerstone Financial

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

The idea behind DBS Group Holdings and Cornerstone Financial 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.