Correlation Between Zevia Pbc and DL Industries

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

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

Diversification Opportunities for Zevia Pbc and DL Industries

0.66

Correlation Coefficient

Zevia Pbc  DL Industries

Poor diversification

The 3 months correlation between Zevia and DLNDY is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Zevia Pbc and DL Industries ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DL Industries ADR and Zevia Pbc 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 Zevia Pbc are associated (or correlated) with DL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DL Industries ADR has no effect on the direction of Zevia Pbc i.e., Zevia Pbc and DL Industries go up and down completely randomly.

Pair Corralation between Zevia Pbc and DL Industries

Given the investment horizon of 90 days Zevia Pbc is expected to under-perform the DL Industries. In addition to that, Zevia Pbc is 2.48 times more volatile than DL Industries ADR. It trades about -0.1 of its total potential returns per unit of risk. DL Industries ADR is currently generating about -0.02 per unit of volatility. If you would invest  262.00  in DL Industries ADR on January 26, 2024 and sell it today you would lose (4.00) from holding DL Industries ADR or give up 1.53% of portfolio value over 90 days.

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

Zevia Pbc  vs.  DL Industries ADR

Zevia Pbc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zevia Pbc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

DL Industries ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Zevia Pbc and DL Industries

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

The idea behind Zevia Pbc and DL Industries 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.