Can any of the company-specific risk be diversified away by investing in both Dream Industrial and Avino Silver 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 Dream Industrial and Avino Silver into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dream Industrial Real and Avino Silver Gold, you can compare the effects of market volatilities on Dream Industrial and Avino Silver 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 Dream Industrial with a short position of Avino Silver. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dream Industrial and Avino Silver.
Diversification Opportunities for Dream Industrial and Avino Silver
The 3 months correlation between Dream and Avino is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Dream Industrial Real and Avino Silver Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avino Silver Gold and Dream Industrial 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 Dream Industrial Real are associated (or correlated) with Avino Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avino Silver Gold has no effect on the direction of Dream Industrial i.e., Dream Industrial and Avino Silver go up and down completely randomly.
Pair Corralation between Dream Industrial and Avino Silver
Assuming the 90 days trading horizon Dream Industrial is expected to generate 3.43 times less return on investment than Avino Silver. But when comparing it to its historical volatility, Dream Industrial Real is 1.92 times less risky than Avino Silver. It trades about 0.2 of its potential returns per unit of risk. Avino Silver Gold is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 59.00 in Avino Silver Gold on September 2, 2023 and sell it today you would earn a total of 17.00 from holding Avino Silver Gold or generate 28.81% return on investment over 90 days.
Over the last 90 days Dream Industrial Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dream Industrial is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.
Over the last 90 days Avino Silver Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Avino Silver is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the insiders.
Dream Industrial and Avino Silver Volatility Contrast
Predicted Return Density
Pair Trading with Dream Industrial and Avino Silver
The main advantage of trading using opposite Dream Industrial and Avino Silver positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dream Industrial position performs unexpectedly, Avino Silver 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 Avino Silver will offset losses from the drop in Avino Silver's long position.
The idea behind Dream Industrial Real and Avino Silver Gold 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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