Correlation Between London Stock and Dun Bradstreet

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

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

Diversification Opportunities for London Stock and Dun Bradstreet

0.63

Correlation Coefficient

London Stock  Dun Bradstreet

Poor diversification

The 3 months correlation between London and Dun is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding London Stock Exchange and Dun Bradstreet Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dun Bradstreet Holdings and London Stock 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 London Stock Exchange are associated (or correlated) with Dun Bradstreet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dun Bradstreet Holdings has no effect on the direction of London Stock i.e., London Stock and Dun Bradstreet go up and down completely randomly.

Pair Corralation between London Stock and Dun Bradstreet

Assuming the 90 days horizon London Stock Exchange is expected to generate 0.82 times more return on investment than Dun Bradstreet. However, London Stock Exchange is 1.22 times less risky than Dun Bradstreet. It trades about 0.49 of its potential returns per unit of risk. Dun Bradstreet Holdings is currently generating about 0.12 per unit of risk. If you would invest  3,430  in London Stock Exchange on September 19, 2024 and sell it today you would earn a total of  294.00  from holding London Stock Exchange or generate 8.57% return on investment over 90 days.

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

London Stock Exchange  vs.  Dun Bradstreet Holdings

London Stock Exchange

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in London Stock Exchange are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, London Stock may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dun Bradstreet Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dun Bradstreet Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Dun Bradstreet may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with London Stock and Dun Bradstreet

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

The idea behind London Stock Exchange and Dun Bradstreet Holdings 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.