Correlation Between Entegris and Disco Corp

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

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

Diversification Opportunities for Entegris and Disco Corp

0.82

Correlation Coefficient

Entegris  Disco Corp

Very poor diversification

The 3 months correlation between Entegris and Disco is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Entegris and Disco Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Disco Corp ADR and Entegris 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 Entegris are associated (or correlated) with Disco Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Disco Corp ADR has no effect on the direction of Entegris i.e., Entegris and Disco Corp go up and down completely randomly.

Pair Corralation between Entegris and Disco Corp

Given the investment horizon of 90 days Entegris is expected to generate 0.9 times more return on investment than Disco Corp. However, Entegris is 1.11 times less risky than Disco Corp. It trades about -0.33 of its potential returns per unit of risk. Disco Corp ADR is currently generating about -0.31 per unit of risk. If you would invest  14,194  in Entegris on January 24, 2024 and sell it today you would lose (1,790) from holding Entegris or give up 12.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Entegris  vs.  Disco Corp ADR

Entegris

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Entegris are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Entegris is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Disco Corp ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Disco Corp ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Disco Corp may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Entegris and Disco Corp

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

The idea behind Entegris and Disco Corp ADR 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 Transaction History module to view history of all your transactions and understand their impact on performance.