Correlation Between DMY Squared and SBC Medical

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

By analyzing existing cross correlation between dMY Squared Technology and SBC Medical Group, you can compare the effects of market volatilities on DMY Squared and SBC Medical 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 DMY Squared with a short position of SBC Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of DMY Squared and SBC Medical.

Diversification Opportunities for DMY Squared and SBC Medical

0.04

Correlation Coefficient

DMY Squared  SBC Medical

Significant diversification

The 3 months correlation between DMY and SBC is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding dMY Squared Technology and SBC Medical Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBC Medical Group and DMY Squared 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 dMY Squared Technology are associated (or correlated) with SBC Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBC Medical Group has no effect on the direction of DMY Squared i.e., DMY Squared and SBC Medical go up and down completely randomly.

Pair Corralation between DMY Squared and SBC Medical

Given the investment horizon of 90 days DMY Squared is expected to generate 242.39 times less return on investment than SBC Medical. But when comparing it to its historical volatility, dMY Squared Technology is 41.61 times less risky than SBC Medical. It trades about 0.04 of its potential returns per unit of risk. SBC Medical Group is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  7.31  in SBC Medical Group on September 4, 2024 and sell it today you would earn a total of  25.69  from holding SBC Medical Group or generate 351.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	85.94%
Values	Daily Returns

dMY Squared Technology  vs.  SBC Medical Group

dMY Squared Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in dMY Squared Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, DMY Squared is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

SBC Medical Group

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SBC Medical Group are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SBC Medical showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DMY Squared and SBC Medical

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

The idea behind dMY Squared Technology and SBC Medical Group 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..