Correlation Between DNOTES and DIA

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

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

Diversification Opportunities for DNOTES and DIA

0.0

Correlation Coefficient

DNOTES  DIA

Pay attention - limited upside

The 3 months correlation between DNOTES and DIA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding DNOTES and DIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIA and DNOTES 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 DNOTES are associated (or correlated) with DIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIA has no effect on the direction of DNOTES i.e., DNOTES and DIA go up and down completely randomly.

Pair Corralation between DNOTES and DIA

If you would invest  42.00  in DIA on April 22, 2025 and sell it today you would earn a total of  18.00  from holding DIA or generate 42.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

DNOTES  vs.  DIA

DNOTES

Risk-Adjusted Performance

Very Weak

Over the last 90 days DNOTES has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, DNOTES is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

DIA

Risk-Adjusted Performance

OK

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

Pair Trading with DNOTES and DIA

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

The idea behind DNOTES and DIA 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.