Correlation Between Diamond Building and Samart Digital

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

By analyzing existing cross correlation between Diamond Building Products and Samart Digital Public, you can compare the effects of market volatilities on Diamond Building and Samart Digital 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 Diamond Building with a short position of Samart Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Building and Samart Digital.

Diversification Opportunities for Diamond Building and Samart Digital

-0.74

Correlation Coefficient

Diamond Building  Samart Digital

Pay attention - limited upside

The 3 months correlation between Diamond and Samart is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Building Products and Samart Digital Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samart Digital Public and Diamond Building 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 Diamond Building Products are associated (or correlated) with Samart Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samart Digital Public has no effect on the direction of Diamond Building i.e., Diamond Building and Samart Digital go up and down completely randomly.

Pair Corralation between Diamond Building and Samart Digital

Assuming the 90 days trading horizon Diamond Building Products is expected to generate 0.07 times more return on investment than Samart Digital. However, Diamond Building Products is 14.12 times less risky than Samart Digital. It trades about -0.21 of its potential returns per unit of risk. Samart Digital Public is currently generating about -0.27 per unit of risk. If you would invest  780.00  in Diamond Building Products on September 14, 2024 and sell it today you would lose (20.00) from holding Diamond Building Products or give up 2.56% of portfolio value over 90 days.

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

Diamond Building Products  vs.  Samart Digital Public

Diamond Building Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diamond Building Products has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Diamond Building is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Samart Digital Public

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Samart Digital Public are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Samart Digital disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diamond Building and Samart Digital

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

The idea behind Diamond Building Products and Samart Digital Public 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.