Correlation Between Dupont De and ME

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

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

Diversification Opportunities for Dupont De and ME

-0.12

Correlation Coefficient

Dupont De  ME

Good diversification

The 3 months correlation between Dupont and ME is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and ME in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ME and Dupont De 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 Dupont De Nemours are associated (or correlated) with ME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ME has no effect on the direction of Dupont De i.e., Dupont De and ME go up and down completely randomly.

Pair Corralation between Dupont De and ME

Allowing for the 90-day total investment horizon Dupont De is expected to generate 22.88 times less return on investment than ME. But when comparing it to its historical volatility, Dupont De Nemours is 2.45 times less risky than ME. It trades about 0.03 of its potential returns per unit of risk. ME is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  0.06  in ME on September 1, 2024 and sell it today you would earn a total of  0.04  from holding ME or generate 67.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

Dupont De Nemours  vs.  ME

Dupont De Nemours

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

ME

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ME are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, ME exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dupont De and ME

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

The idea behind Dupont De Nemours and ME 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 CEOs Directory module to screen CEOs from public companies around the world.