Correlation Between Dupont De and MSAD Insurance

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

Diversification Opportunities for Dupont De and MSAD Insurance

0.77

Correlation Coefficient

Dupont De  MSAD Insurance

Poor diversification

The 3 months correlation between Dupont and MSAD is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and MSAD Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSAD Insurance Group 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 MSAD Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSAD Insurance Group has no effect on the direction of Dupont De i.e., Dupont De and MSAD Insurance go up and down completely randomly.

Pair Corralation between Dupont De and MSAD Insurance

Allowing for the 90-day total investment horizon Dupont De is expected to generate 1.98 times less return on investment than MSAD Insurance. But when comparing it to its historical volatility, Dupont De Nemours is 2.01 times less risky than MSAD Insurance. It trades about 0.15 of its potential returns per unit of risk. MSAD Insurance Group is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,791  in MSAD Insurance Group on February 23, 2024 and sell it today you would earn a total of  210.00  from holding MSAD Insurance Group or generate 11.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Dupont De Nemours  vs.  MSAD Insurance Group

Dupont De Nemours

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Dupont De may actually be approaching a critical reversion point that can send shares even higher in June 2024.

MSAD Insurance Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MSAD Insurance Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, MSAD Insurance showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dupont De and MSAD Insurance

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

The idea behind Dupont De Nemours and MSAD Insurance 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.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.