Correlation Between DHI and GEE
Can any of the company-specific risk be diversified away by investing in both DHI and GEE 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 DHI and GEE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DHI Group and GEE Group, you can compare the effects of market volatilities on DHI and GEE 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 DHI with a short position of GEE. Check out your portfolio center. Please also check ongoing floating volatility patterns of DHI and GEE.
Diversification Opportunities for DHI and GEE
Good diversification
The 3 months correlation between DHI and GEE is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding DHI Group and GEE Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEE Group and DHI 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 DHI Group are associated (or correlated) with GEE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEE Group has no effect on the direction of DHI i.e., DHI and GEE go up and down completely randomly.
Pair Corralation between DHI and GEE
Considering the 90-day investment horizon DHI Group is expected to generate 2.2 times more return on investment than GEE. However, DHI is 2.2 times more volatile than GEE Group. It trades about -0.03 of its potential returns per unit of risk. GEE Group is currently generating about -0.24 per unit of risk. If you would invest 258.00 in DHI Group on January 26, 2024 and sell it today you would lose (10.00) from holding DHI Group or give up 3.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DHI Group vs. GEE Group
Performance |
| Timeline |
| DHI Group |
| GEE Group |
DHI and GEE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DHI and GEE
The main advantage of trading using opposite DHI and GEE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DHI position performs unexpectedly, GEE 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 GEE will offset losses from the drop in GEE's long position.The idea behind DHI Group and GEE 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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