Correlation Between DLH Holdings and Global Payments

Can any of the company-specific risk be diversified away by investing in both DLH Holdings and Global Payments 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 DLH Holdings and Global Payments into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DLH Holdings Corp and Global Payments, you can compare the effects of market volatilities on DLH Holdings and Global Payments 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 DLH Holdings with a short position of Global Payments. Check out your portfolio center. Please also check ongoing floating volatility patterns of DLH Holdings and Global Payments.

Diversification Opportunities for DLH Holdings and Global Payments

0.74

Correlation Coefficient

DLH Holdings  Global Payments

Poor diversification

The 3 months correlation between DLH and Global is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding DLH Holdings Corp and Global Payments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Payments and DLH Holdings 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 DLH Holdings Corp are associated (or correlated) with Global Payments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Payments has no effect on the direction of DLH Holdings i.e., DLH Holdings and Global Payments go up and down completely randomly.

Pair Corralation between DLH Holdings and Global Payments

Given the investment horizon of 90 days DLH Holdings is expected to generate 1.05 times less return on investment than Global Payments. In addition to that, DLH Holdings is 1.45 times more volatile than Global Payments. It trades about 0.03 of its total potential returns per unit of risk. Global Payments is currently generating about 0.04 per unit of volatility. If you would invest  10,485  in Global Payments on January 20, 2024 and sell it today you would earn a total of  1,733  from holding Global Payments or generate 16.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

DLH Holdings Corp  vs.  Global Payments

DLH Holdings Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DLH Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Global Payments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Payments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with DLH Holdings and Global Payments

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

The idea behind DLH Holdings Corp and Global Payments 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.