Correlation Between Intel and DAVIDsTEA

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

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

Diversification Opportunities for Intel and DAVIDsTEA

0.7

Correlation Coefficient

Intel  DAVIDsTEA

Poor diversification

The 3 months correlation between Intel and DAVIDsTEA is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Intel and DAVIDsTEA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAVIDsTEA and Intel 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 Intel are associated (or correlated) with DAVIDsTEA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAVIDsTEA has no effect on the direction of Intel i.e., Intel and DAVIDsTEA go up and down completely randomly.

Pair Corralation between Intel and DAVIDsTEA

Given the investment horizon of 90 days Intel is expected to generate 0.36 times more return on investment than DAVIDsTEA. However, Intel is 2.77 times less risky than DAVIDsTEA. It trades about -0.23 of its potential returns per unit of risk. DAVIDsTEA is currently generating about -0.11 per unit of risk. If you would invest  4,543  in Intel on March 4, 2024 and sell it today you would lose (1,458) from holding Intel or give up 32.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Intel  vs.  DAVIDsTEA

Intel

Risk-Adjusted Performance

0 of 100

Very Weak

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

DAVIDsTEA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DAVIDsTEA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in July 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Intel and DAVIDsTEA

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

The idea behind Intel and DAVIDsTEA 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..