Correlation Between DNA Biomed and Computer Direct

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

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

Diversification Opportunities for DNA Biomed and Computer Direct

0.45

Correlation Coefficient

DNA Biomed  Computer Direct

Very weak diversification

The 3 months correlation between DNA and Computer is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding DNA Biomed Solns and Computer Direct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computer Direct and DNA Biomed 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 DNA Biomed Solns are associated (or correlated) with Computer Direct. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computer Direct has no effect on the direction of DNA Biomed i.e., DNA Biomed and Computer Direct go up and down completely randomly.

Pair Corralation between DNA Biomed and Computer Direct

Assuming the 90 days trading horizon DNA Biomed Solns is expected to generate 2.78 times more return on investment than Computer Direct. However, DNA Biomed is 2.78 times more volatile than Computer Direct. It trades about 0.16 of its potential returns per unit of risk. Computer Direct is currently generating about -0.3 per unit of risk. If you would invest  7,830  in DNA Biomed Solns on February 4, 2024 and sell it today you would earn a total of  1,070  from holding DNA Biomed Solns or generate 13.67% return on investment over 90 days.

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

DNA Biomed Solns  vs.  Computer Direct

DNA Biomed Solns

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DNA Biomed Solns are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DNA Biomed sustained solid returns over the last few months and may actually be approaching a breakup point.

Computer Direct

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Computer Direct are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Computer Direct may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with DNA Biomed and Computer Direct

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

The idea behind DNA Biomed Solns and Computer Direct 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.