Correlation Between Df Dent and Glg Intl

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

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

Diversification Opportunities for Df Dent and Glg Intl

0.75

Correlation Coefficient

Df Dent  Glg Intl

Poor diversification

The 3 months correlation between DFDSX and Glg is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Df Dent Small and Glg Intl Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glg Intl Small and Df Dent 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 Df Dent Small are associated (or correlated) with Glg Intl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glg Intl Small has no effect on the direction of Df Dent i.e., Df Dent and Glg Intl go up and down completely randomly.

Pair Corralation between Df Dent and Glg Intl

Assuming the 90 days horizon Df Dent is expected to generate 4.49 times less return on investment than Glg Intl. In addition to that, Df Dent is 1.07 times more volatile than Glg Intl Small. It trades about 0.05 of its total potential returns per unit of risk. Glg Intl Small is currently generating about 0.22 per unit of volatility. If you would invest  8,426  in Glg Intl Small on September 13, 2024 and sell it today you would earn a total of  351.00  from holding Glg Intl Small or generate 4.17% return on investment over 90 days.

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

Df Dent Small  vs.  Glg Intl Small

Df Dent Small

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Df Dent Small are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Df Dent may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Glg Intl Small

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Glg Intl Small are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Glg Intl may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Df Dent and Glg Intl

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

The idea behind Df Dent Small and Glg Intl Small 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.