Correlation Between DLH Holdings and IAA

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

Diversification Opportunities for DLH Holdings and IAA

-0.23

Correlation Coefficient

DLH Holdings  IAA

Very good diversification

The 3 months correlation between DLH and IAA is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding DLH Holdings Corp and IAA Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IAA Inc 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 IAA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IAA Inc has no effect on the direction of DLH Holdings i.e., DLH Holdings and IAA go up and down completely randomly.

Pair Corralation between DLH Holdings and IAA

Given the investment horizon of 90 days DLH Holdings Corp is expected to under-perform the IAA. In addition to that, DLH Holdings is 1.24 times more volatile than IAA Inc. It trades about -0.01 of its total potential returns per unit of risk. IAA Inc is currently generating about 0.03 per unit of volatility. If you would invest  3,665  in IAA Inc on January 19, 2024 and sell it today you would earn a total of  324.00  from holding IAA Inc or generate 8.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	45.25%
Values	Daily Returns

DLH Holdings Corp  vs.  IAA Inc

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 conflicting 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.

IAA Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IAA Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IAA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with DLH Holdings and IAA

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

The idea behind DLH Holdings Corp and IAA Inc 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.