Correlation Between Digital Power and Daejoo
Can any of the company-specific risk be diversified away by investing in both Digital Power and Daejoo 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 Digital Power and Daejoo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Digital Power Communications and Daejoo Inc, you can compare the effects of market volatilities on Digital Power and Daejoo 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 Digital Power with a short position of Daejoo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Power and Daejoo.
Diversification Opportunities for Digital Power and Daejoo
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Digital and Daejoo is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Digital Power Communications and Daejoo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daejoo Inc and Digital Power 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 Digital Power Communications are associated (or correlated) with Daejoo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daejoo Inc has no effect on the direction of Digital Power i.e., Digital Power and Daejoo go up and down completely randomly.
Pair Corralation between Digital Power and Daejoo
Assuming the 90 days trading horizon Digital Power Communications is expected to under-perform the Daejoo. But the stock apears to be less risky and, when comparing its historical volatility, Digital Power Communications is 1.29 times less risky than Daejoo. The stock trades about -0.16 of its potential returns per unit of risk. The Daejoo Inc is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 144,900 in Daejoo Inc on November 3, 2024 and sell it today you would earn a total of 8,100 from holding Daejoo Inc or generate 5.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Digital Power Communications vs. Daejoo Inc
Performance |
| Timeline |
| Digital Power Commun |
| Daejoo Inc |
Digital Power and Daejoo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Power and Daejoo
The main advantage of trading using opposite Digital Power and Daejoo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Power position performs unexpectedly, Daejoo 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 Daejoo will offset losses from the drop in Daejoo's long position.| Digital Power vs. KT Submarine Telecom | Digital Power vs. Aprogen Healthcare Games | Digital Power vs. InnoTherapy | Digital Power vs. Seoul Electronics Telecom |
| Daejoo vs. Kyeryong Construction Industrial | Daejoo vs. Iljin Display | Daejoo vs. Sangsin Energy Display | Daejoo vs. SEOJEON ELECTRIC MACHINERY |
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 Stocks Directory module to find actively traded stocks across global markets.
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