Correlation Between Dupont De and Cabot

Can any of the company-specific risk be diversified away by investing in both Dupont De and Cabot 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 Cabot 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 Cabot, you can compare the effects of market volatilities on Dupont De and Cabot 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 Cabot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and Cabot.

Diversification Opportunities for Dupont De and Cabot

0.86

Correlation Coefficient

Dupont De  Cabot

Very poor diversification

The 3 months correlation between Dupont and Cabot is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Cabot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabot 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 Cabot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabot has no effect on the direction of Dupont De i.e., Dupont De and Cabot go up and down completely randomly.

Pair Corralation between Dupont De and Cabot

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to under-perform the Cabot. But the stock apears to be less risky and, when comparing its historical volatility, Dupont De Nemours is 1.41 times less risky than Cabot. The stock trades about -0.11 of its potential returns per unit of risk. The Cabot is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  8,952  in Cabot on January 25, 2024 and sell it today you would earn a total of  388.00  from holding Cabot or generate 4.33% return on investment over 90 days.

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

Dupont De Nemours  vs.  Cabot

Dupont De Nemours

Risk-Adjusted Performance

13 of 100

Good

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

Cabot

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cabot are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting fundamental drivers, Cabot unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dupont De and Cabot

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

The idea behind Dupont De Nemours and Cabot 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.