Correlation Between Dupont De and Electronics Fund

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

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

Diversification Opportunities for Dupont De and Electronics Fund

0.73

Correlation Coefficient

Dupont De  Electronics Fund

Poor diversification

The 3 months correlation between Dupont and Electronics is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Electronics Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronics Fund Class and Dupont De 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 Dupont De Nemours are associated (or correlated) with Electronics Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronics Fund Class has no effect on the direction of Dupont De i.e., Dupont De and Electronics Fund go up and down completely randomly.

Pair Corralation between Dupont De and Electronics Fund

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to under-perform the Electronics Fund. But the stock apears to be less risky and, when comparing its historical volatility, Dupont De Nemours is 1.88 times less risky than Electronics Fund. The stock trades about -0.26 of its potential returns per unit of risk. The Electronics Fund Class is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  32,804  in Electronics Fund Class on January 31, 2024 and sell it today you would lose (1,267) from holding Electronics Fund Class or give up 3.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Dupont De Nemours  vs.  Electronics Fund Class

Dupont De Nemours

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Dupont De exhibited solid returns over the last few months and may actually be approaching a breakup point.

Electronics Fund Class

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Electronics Fund Class are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Electronics Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dupont De and Electronics Fund

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

The idea behind Dupont De Nemours and Electronics Fund Class 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.