Correlation Between Dupont De and Invesco KBW

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

Diversification Opportunities for Dupont De and Invesco KBW

0.71

Correlation Coefficient

Dupont De  Invesco KBW

Poor diversification

The 3 months correlation between Dupont and Invesco is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Invesco KBW Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco KBW Bank 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 Invesco KBW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco KBW Bank has no effect on the direction of Dupont De i.e., Dupont De and Invesco KBW go up and down completely randomly.

Pair Corralation between Dupont De and Invesco KBW

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to under-perform the Invesco KBW. But the stock apears to be less risky and, when comparing its historical volatility, Dupont De Nemours is 1.15 times less risky than Invesco KBW. The stock trades about -0.12 of its potential returns per unit of risk. The Invesco KBW Bank is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  5,190  in Invesco KBW Bank on January 24, 2024 and sell it today you would lose (61.00) from holding Invesco KBW Bank or give up 1.18% of portfolio value over 90 days.

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

Dupont De Nemours  vs.  Invesco KBW Bank

Dupont De Nemours

Risk-Adjusted Performance

13 of 100

Very Weak

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 unfluctuating fundamental indicators, Dupont De exhibited solid returns over the last few months and may actually be approaching a breakup point.

Invesco KBW Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco KBW Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Invesco KBW is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dupont De and Invesco KBW

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

The idea behind Dupont De Nemours and Invesco KBW Bank 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.