Correlation Between Exponent and Deluxe

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

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

Diversification Opportunities for Exponent and Deluxe

-0.48

Correlation Coefficient

Exponent  Deluxe

Very good diversification

The 3 months correlation between Exponent and Deluxe is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Exponent and Deluxe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deluxe and Exponent 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 Exponent are associated (or correlated) with Deluxe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deluxe has no effect on the direction of Exponent i.e., Exponent and Deluxe go up and down completely randomly.

Pair Corralation between Exponent and Deluxe

Given the investment horizon of 90 days Exponent is expected to under-perform the Deluxe. But the stock apears to be less risky and, when comparing its historical volatility, Exponent is 1.18 times less risky than Deluxe. The stock trades about -0.05 of its potential returns per unit of risk. The Deluxe is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,947  in Deluxe on September 3, 2024 and sell it today you would earn a total of  370.00  from holding Deluxe or generate 19.0% return on investment over 90 days.

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

Exponent  vs.  Deluxe

Exponent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exponent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Exponent is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Deluxe

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deluxe are ranked lower than 10 (%) 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.

Pair Trading with Exponent and Deluxe

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

The idea behind Exponent and Deluxe 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.