Correlation Between Dynamic Active and Premium Resources

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

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

Diversification Opportunities for Dynamic Active and Premium Resources

0.62

Correlation Coefficient

Dynamic Active  Premium Resources

Poor diversification

The 3 months correlation between Dynamic and Premium is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Dynamic Active Dividend and Premium Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premium Resources and Dynamic Active 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 Dynamic Active Dividend are associated (or correlated) with Premium Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premium Resources has no effect on the direction of Dynamic Active i.e., Dynamic Active and Premium Resources go up and down completely randomly.

Pair Corralation between Dynamic Active and Premium Resources

Assuming the 90 days trading horizon Dynamic Active Dividend is expected to generate 0.19 times more return on investment than Premium Resources. However, Dynamic Active Dividend is 5.33 times less risky than Premium Resources. It trades about 0.39 of its potential returns per unit of risk. Premium Resources is currently generating about 0.04 per unit of risk. If you would invest  5,197  in Dynamic Active Dividend on April 21, 2025 and sell it today you would earn a total of  1,533  from holding Dynamic Active Dividend or generate 29.5% return on investment over 90 days.

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

Dynamic Active Dividend  vs.  Premium Resources

Dynamic Active Dividend

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic Active Dividend are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Dynamic Active displayed solid returns over the last few months and may actually be approaching a breakup point.

Premium Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Premium Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Premium Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dynamic Active and Premium Resources

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

The idea behind Dynamic Active Dividend and Premium Resources 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.