Correlation Between KARRAT and DGB

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

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

Diversification Opportunities for KARRAT and DGB

0.11

Correlation Coefficient

KARRAT  DGB

Average diversification

The 3 months correlation between KARRAT and DGB is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding KARRAT and DGB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DGB and KARRAT 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 KARRAT are associated (or correlated) with DGB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DGB has no effect on the direction of KARRAT i.e., KARRAT and DGB go up and down completely randomly.

Pair Corralation between KARRAT and DGB

Assuming the 90 days trading horizon KARRAT is expected to generate 2.59 times more return on investment than DGB. However, KARRAT is 2.59 times more volatile than DGB. It trades about 0.06 of its potential returns per unit of risk. DGB is currently generating about 0.12 per unit of risk. If you would invest  43.00  in KARRAT on August 23, 2024 and sell it today you would earn a total of  2.00  from holding KARRAT or generate 4.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

KARRAT  vs.  DGB

KARRAT

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KARRAT are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, KARRAT sustained solid returns over the last few months and may actually be approaching a breakup point.

DGB

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DGB are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, DGB exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KARRAT and DGB

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

The idea behind KARRAT and DGB 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.