Correlation Between Tri Pointe and DATAGROUP

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

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

Diversification Opportunities for Tri Pointe and DATAGROUP

-0.17

Correlation Coefficient

Tri Pointe  DATAGROUP

Good diversification

The 3 months correlation between Tri and DATAGROUP is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Tri Pointe Homes and DATAGROUP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DATAGROUP SE and Tri Pointe 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 Tri Pointe Homes are associated (or correlated) with DATAGROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DATAGROUP SE has no effect on the direction of Tri Pointe i.e., Tri Pointe and DATAGROUP go up and down completely randomly.

Pair Corralation between Tri Pointe and DATAGROUP

Assuming the 90 days horizon Tri Pointe Homes is expected to under-perform the DATAGROUP. But the stock apears to be less risky and, when comparing its historical volatility, Tri Pointe Homes is 1.38 times less risky than DATAGROUP. The stock trades about -0.1 of its potential returns per unit of risk. The DATAGROUP SE is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,915  in DATAGROUP SE on September 23, 2024 and sell it today you would earn a total of  685.00  from holding DATAGROUP SE or generate 17.5% return on investment over 90 days.

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

Tri Pointe Homes  vs.  DATAGROUP SE

Tri Pointe Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tri Pointe Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

DATAGROUP SE

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DATAGROUP SE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, DATAGROUP unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tri Pointe and DATAGROUP

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

The idea behind Tri Pointe Homes and DATAGROUP SE 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.