Correlation Between Digital Power and Korean Reinsurance
Can any of the company-specific risk be diversified away by investing in both Digital Power and Korean Reinsurance 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 Korean Reinsurance 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 Korean Reinsurance Co, you can compare the effects of market volatilities on Digital Power and Korean Reinsurance 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 Korean Reinsurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Power and Korean Reinsurance.
Diversification Opportunities for Digital Power and Korean Reinsurance
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Digital and Korean is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Digital Power Communications and Korean Reinsurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korean Reinsurance 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 Korean Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korean Reinsurance has no effect on the direction of Digital Power i.e., Digital Power and Korean Reinsurance go up and down completely randomly.
Pair Corralation between Digital Power and Korean Reinsurance
Assuming the 90 days trading horizon Digital Power Communications is expected to under-perform the Korean Reinsurance. But the stock apears to be less risky and, when comparing its historical volatility, Digital Power Communications is 1.12 times less risky than Korean Reinsurance. The stock trades about -0.03 of its potential returns per unit of risk. The Korean Reinsurance Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 800,000 in Korean Reinsurance Co on October 20, 2024 and sell it today you would earn a total of 25,000 from holding Korean Reinsurance Co or generate 3.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Digital Power Communications vs. Korean Reinsurance Co
Performance |
| Timeline |
| Digital Power Commun |
| Korean Reinsurance |
Digital Power and Korean Reinsurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Power and Korean Reinsurance
The main advantage of trading using opposite Digital Power and Korean Reinsurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Power position performs unexpectedly, Korean Reinsurance 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 Korean Reinsurance will offset losses from the drop in Korean Reinsurance's long position.| Digital Power vs. Hanmi Semiconductor Co | Digital Power vs. BGF Retail Co | Digital Power vs. ABOV Semiconductor Co | Digital Power vs. Shinsegae Engineering Construction |
| Korean Reinsurance vs. E Investment Development | Korean Reinsurance vs. SBI Investment KOREA | Korean Reinsurance vs. DB Financial Investment | Korean Reinsurance vs. SV 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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