Correlation Between Posco Chemical and Digital Multimedia
Can any of the company-specific risk be diversified away by investing in both Posco Chemical and Digital Multimedia 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 Posco Chemical and Digital Multimedia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Posco Chemical Co and Digital Multimedia Technology, you can compare the effects of market volatilities on Posco Chemical and Digital Multimedia 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 Posco Chemical with a short position of Digital Multimedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Posco Chemical and Digital Multimedia.
Diversification Opportunities for Posco Chemical and Digital Multimedia
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Posco and Digital is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Posco Chemical Co and Digital Multimedia Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Multimedia and Posco Chemical 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 Posco Chemical Co are associated (or correlated) with Digital Multimedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Multimedia has no effect on the direction of Posco Chemical i.e., Posco Chemical and Digital Multimedia go up and down completely randomly.
Pair Corralation between Posco Chemical and Digital Multimedia
Assuming the 90 days trading horizon Posco Chemical Co is expected to under-perform the Digital Multimedia. In addition to that, Posco Chemical is 1.18 times more volatile than Digital Multimedia Technology. It trades about -0.24 of its total potential returns per unit of risk. Digital Multimedia Technology is currently generating about -0.21 per unit of volatility. If you would invest 178,500 in Digital Multimedia Technology on September 13, 2024 and sell it today you would lose (27,700) from holding Digital Multimedia Technology or give up 15.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Posco Chemical Co vs. Digital Multimedia Technology
Performance |
| Timeline |
| Posco Chemical |
| Digital Multimedia |
Posco Chemical and Digital Multimedia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Posco Chemical and Digital Multimedia
The main advantage of trading using opposite Posco Chemical and Digital Multimedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Posco Chemical position performs unexpectedly, Digital Multimedia 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 Digital Multimedia will offset losses from the drop in Digital Multimedia's long position.| Posco Chemical vs. Dong A Steel Technology | Posco Chemical vs. Netmarble Games Corp | Posco Chemical vs. Guyoung Technology Co | Posco Chemical vs. Hwangkum Steel Technology |
| Digital Multimedia vs. Samsung Electronics Co | Digital Multimedia vs. Samsung Electronics Co | Digital Multimedia vs. SK Hynix | Digital Multimedia vs. POSCO Holdings |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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