Correlation Between Dupont De and Servotech Power

Can any of the company-specific risk be diversified away by investing in both Dupont De and Servotech Power 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 Servotech Power 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 Servotech Power Systems, you can compare the effects of market volatilities on Dupont De and Servotech Power 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 Servotech Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and Servotech Power.

Diversification Opportunities for Dupont De and Servotech Power

0.67

Correlation Coefficient

Dupont De  Servotech Power

Poor diversification

The 3 months correlation between Dupont and Servotech is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Servotech Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Servotech Power Systems 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 Servotech Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Servotech Power Systems has no effect on the direction of Dupont De i.e., Dupont De and Servotech Power go up and down completely randomly.

Pair Corralation between Dupont De and Servotech Power

Allowing for the 90-day total investment horizon Dupont De is expected to generate 4.29 times less return on investment than Servotech Power. But when comparing it to its historical volatility, Dupont De Nemours is 1.9 times less risky than Servotech Power. It trades about 0.03 of its potential returns per unit of risk. Servotech Power Systems is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  17,657  in Servotech Power Systems on August 31, 2024 and sell it today you would earn a total of  584.00  from holding Servotech Power Systems or generate 3.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Dupont De Nemours  vs.  Servotech Power Systems

Dupont De Nemours

Risk-Adjusted Performance

2 of 100

Very 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.

Servotech Power Systems

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Servotech Power Systems are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Servotech Power exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dupont De and Servotech Power

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

The idea behind Dupont De Nemours and Servotech Power Systems 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .