Correlation Between DKargo and ULT

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Can any of the company-specific risk be diversified away by investing in both DKargo and ULT 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 DKargo and ULT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between dKargo and ULT, you can compare the effects of market volatilities on DKargo and ULT 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 DKargo with a short position of ULT. Check out your portfolio center. Please also check ongoing floating volatility patterns of DKargo and ULT.

Diversification Opportunities for DKargo and ULT

-0.64
  Correlation Coefficient

Excellent diversification

The 3 months correlation between DKargo and ULT is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding dKargo and ULT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ULT and DKargo 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 dKargo are associated (or correlated) with ULT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ULT has no effect on the direction of DKargo i.e., DKargo and ULT go up and down completely randomly.

Pair Corralation between DKargo and ULT

Assuming the 90 days trading horizon dKargo is expected to generate 1.7 times more return on investment than ULT. However, DKargo is 1.7 times more volatile than ULT. It trades about 0.01 of its potential returns per unit of risk. ULT is currently generating about 0.0 per unit of risk. If you would invest  6.23  in dKargo on December 29, 2023 and sell it today you would lose (2.41) from holding dKargo or give up 38.68% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy73.58%
ValuesDaily Returns

dKargo  vs.  ULT

 Performance 
       Timeline  
dKargo 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in dKargo are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, DKargo exhibited solid returns over the last few months and may actually be approaching a breakup point.
ULT 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days ULT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ULT is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

DKargo and ULT Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DKargo and ULT

The main advantage of trading using opposite DKargo and ULT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DKargo position performs unexpectedly, ULT 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 ULT will offset losses from the drop in ULT's long position.
The idea behind dKargo and ULT 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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