Correlation Between Deep Down and Mind Technology

Can any of the company-specific risk be diversified away by investing in both Deep Down and Mind Technology 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 Deep Down and Mind Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Deep Down and Mind Technology, you can compare the effects of market volatilities on Deep Down and Mind Technology 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 Deep Down with a short position of Mind Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deep Down and Mind Technology.

Diversification Opportunities for Deep Down and Mind Technology

0.65

Correlation Coefficient

Deep Down  Mind Technology

Poor diversification

The 3 months correlation between Deep and Mind is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Deep Down and Mind Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mind Technology and Deep Down 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 Deep Down are associated (or correlated) with Mind Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mind Technology has no effect on the direction of Deep Down i.e., Deep Down and Mind Technology go up and down completely randomly.

Pair Corralation between Deep Down and Mind Technology

Given the investment horizon of 90 days Deep Down is expected to generate 0.56 times more return on investment than Mind Technology. However, Deep Down is 1.78 times less risky than Mind Technology. It trades about -0.03 of its potential returns per unit of risk. Mind Technology is currently generating about -0.02 per unit of risk. If you would invest  63.00  in Deep Down on January 24, 2024 and sell it today you would lose (5.00) from holding Deep Down or give up 7.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	12.03%
Values	Daily Returns

Deep Down  vs.  Mind Technology

Deep Down

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deep Down has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Deep Down is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Mind Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mind Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic 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.

Pair Trading with Deep Down and Mind Technology

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

The idea behind Deep Down and Mind Technology 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.