Correlation Between Dave and Porch

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

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

Diversification Opportunities for Dave and Porch

-0.38

Correlation Coefficient

Dave  Porch

Very good diversification

The 3 months correlation between Dave and Porch is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Dave Inc and Porch Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porch Group and Dave 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 Dave Inc are associated (or correlated) with Porch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porch Group has no effect on the direction of Dave i.e., Dave and Porch go up and down completely randomly.

Pair Corralation between Dave and Porch

Given the investment horizon of 90 days Dave Inc is expected to generate 0.83 times more return on investment than Porch. However, Dave Inc is 1.2 times less risky than Porch. It trades about 0.04 of its potential returns per unit of risk. Porch Group is currently generating about 0.03 per unit of risk. If you would invest  3,029  in Dave Inc on March 2, 2024 and sell it today you would earn a total of  1,718  from holding Dave Inc or generate 56.72% return on investment over 90 days.

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

Dave Inc  vs.  Porch Group

Dave Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dave Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Dave exhibited solid returns over the last few months and may actually be approaching a breakup point.

Porch Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Porch Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in July 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Dave and Porch

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

The idea behind Dave Inc and Porch Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.