Correlation Between Humanity and DBC
Can any of the company-specific risk be diversified away by investing in both Humanity and DBC 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 Humanity and DBC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Humanity and DBC, you can compare the effects of market volatilities on Humanity and DBC 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 Humanity with a short position of DBC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Humanity and DBC.
Diversification Opportunities for Humanity and DBC
Very good diversification
The 3 months correlation between Humanity and DBC is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Humanity and DBC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DBC and Humanity 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 Humanity are associated (or correlated) with DBC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DBC has no effect on the direction of Humanity i.e., Humanity and DBC go up and down completely randomly.
Pair Corralation between Humanity and DBC
Given the investment horizon of 90 days Humanity is expected to generate 3.14 times more return on investment than DBC. However, Humanity is 3.14 times more volatile than DBC. It trades about 0.18 of its potential returns per unit of risk. DBC is currently generating about -0.13 per unit of risk. If you would invest 2.90 in Humanity on August 25, 2025 and sell it today you would earn a total of 9.10 from holding Humanity or generate 313.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Humanity vs. DBC
Performance |
| Timeline |
| Humanity |
| DBC |
Humanity and DBC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Humanity and DBC
The main advantage of trading using opposite Humanity and DBC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Humanity position performs unexpectedly, DBC 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 DBC will offset losses from the drop in DBC's long position.The idea behind Humanity and DBC 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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