Correlation Between Deluxe and Global E

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

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

Diversification Opportunities for Deluxe and Global E

0.83

Correlation Coefficient

Deluxe  Global E

Very poor diversification

The 3 months correlation between Deluxe and Global is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Deluxe and Global E Online in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global E Online and Deluxe 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 Deluxe are associated (or correlated) with Global E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global E Online has no effect on the direction of Deluxe i.e., Deluxe and Global E go up and down completely randomly.

Pair Corralation between Deluxe and Global E

Considering the 90-day investment horizon Deluxe is expected to generate 2.2 times less return on investment than Global E. But when comparing it to its historical volatility, Deluxe is 1.04 times less risky than Global E. It trades about 0.12 of its potential returns per unit of risk. Global E Online is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  3,770  in Global E Online on September 26, 2024 and sell it today you would earn a total of  1,745  from holding Global E Online or generate 46.29% return on investment over 90 days.

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

Deluxe  vs.  Global E Online

Deluxe

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deluxe are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, Deluxe showed solid returns over the last few months and may actually be approaching a breakup point.

Global E Online

Risk-Adjusted Performance

20 of 100

Solid

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

Pair Trading with Deluxe and Global E

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

The idea behind Deluxe and Global E Online 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.