Correlation Between Big 5 and Dupont Denemours

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Can any of the company-specific risk be diversified away by investing in both Big 5 and Dupont Denemours 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 Big 5 and Dupont Denemours into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big 5 Sporting and Dupont Denemours, you can compare the effects of market volatilities on Big 5 and Dupont Denemours 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 Big 5 with a short position of Dupont Denemours. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and Dupont Denemours.

Diversification Opportunities for Big 5 and Dupont Denemours

0.45
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Big 5 and Dupont is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and Dupont Denemours in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dupont Denemours and Big 5 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 Big 5 Sporting are associated (or correlated) with Dupont Denemours. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dupont Denemours has no effect on the direction of Big 5 i.e., Big 5 and Dupont Denemours go up and down completely randomly.

Pair Corralation between Big 5 and Dupont Denemours

Given the investment horizon of 90 days Big 5 Sporting is expected to generate 2.44 times more return on investment than Dupont Denemours. However, Big 5 is 2.44 times more volatile than Dupont Denemours. It trades about 0.11 of its potential returns per unit of risk. Dupont Denemours is currently generating about 0.14 per unit of risk. If you would invest  1,133  in Big 5 Sporting on May 17, 2022 and sell it today you would earn a total of  216.00  from holding Big 5 Sporting or generate 19.06% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Big 5 Sporting  vs.  Dupont Denemours

 Performance (%) 
       Timeline  
Big 5 Sporting 
Big 5 Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Big 5 Sporting are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, Big 5 is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Big 5 Price Channel

Dupont Denemours 
Dupont Performance
0 of 100
Over the last 90 days Dupont Denemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Dupont Denemours is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Dupont Price Channel

Big 5 and Dupont Denemours Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Big 5 and Dupont Denemours

The main advantage of trading using opposite Big 5 and Dupont Denemours positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 position performs unexpectedly, Dupont Denemours 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 Dupont Denemours will offset losses from the drop in Dupont Denemours' long position.
The idea behind Big 5 Sporting and Dupont Denemours 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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