Correlation Between Dupont De and Koninklijke DSM

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

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

Diversification Opportunities for Dupont De and Koninklijke DSM

-0.5

Correlation Coefficient

Dupont De  Koninklijke DSM

Very good diversification

The 3 months correlation between Dupont and Koninklijke is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Koninklijke DSM NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke DSM NV and Dupont De 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 Dupont De Nemours are associated (or correlated) with Koninklijke DSM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke DSM NV has no effect on the direction of Dupont De i.e., Dupont De and Koninklijke DSM go up and down completely randomly.

Pair Corralation between Dupont De and Koninklijke DSM

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to generate 0.14 times more return on investment than Koninklijke DSM. However, Dupont De Nemours is 6.99 times less risky than Koninklijke DSM. It trades about 0.03 of its potential returns per unit of risk. Koninklijke DSM NV is currently generating about -0.18 per unit of risk. If you would invest  7,712  in Dupont De Nemours on February 3, 2024 and sell it today you would earn a total of  63.00  from holding Dupont De Nemours or generate 0.82% return on investment over 90 days.

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

Dupont De Nemours  vs.  Koninklijke DSM NV

Dupont De Nemours

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Dupont De exhibited solid returns over the last few months and may actually be approaching a breakup point.

Koninklijke DSM NV

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Koninklijke DSM NV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating forward-looking signals, Koninklijke DSM reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dupont De and Koninklijke DSM

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

The idea behind Dupont De Nemours and Koninklijke DSM NV 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.