Correlation Between Dolby Laboratories and Global Payments

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

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

Diversification Opportunities for Dolby Laboratories and Global Payments

0.14

Correlation Coefficient

Dolby Laboratories  Global Payments

Average diversification

The 3 months correlation between Dolby and Global is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Dolby Laboratories and Global Payments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Payments and Dolby Laboratories 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 Dolby Laboratories are associated (or correlated) with Global Payments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Payments has no effect on the direction of Dolby Laboratories i.e., Dolby Laboratories and Global Payments go up and down completely randomly.

Pair Corralation between Dolby Laboratories and Global Payments

Considering the 90-day investment horizon Dolby Laboratories is expected to generate 1.08 times more return on investment than Global Payments. However, Dolby Laboratories is 1.08 times more volatile than Global Payments. It trades about 0.1 of its potential returns per unit of risk. Global Payments is currently generating about 0.07 per unit of risk. If you would invest  7,033  in Dolby Laboratories on September 3, 2024 and sell it today you would earn a total of  1,014  from holding Dolby Laboratories or generate 14.42% return on investment over 90 days.

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

Dolby Laboratories  vs.  Global Payments

Dolby Laboratories

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dolby Laboratories are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Dolby Laboratories sustained solid returns over the last few months and may actually be approaching a breakup point.

Global Payments

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Payments are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Global Payments may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dolby Laboratories and Global Payments

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

The idea behind Dolby Laboratories and Global Payments 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.