Correlation Between Digital Power and Hyundai
Can any of the company-specific risk be diversified away by investing in both Digital Power and Hyundai 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 Hyundai 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 Hyundai Motor, you can compare the effects of market volatilities on Digital Power and Hyundai 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 Hyundai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Power and Hyundai.
Diversification Opportunities for Digital Power and Hyundai
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Digital and Hyundai is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Digital Power Communications and Hyundai Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor 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 Hyundai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Motor has no effect on the direction of Digital Power i.e., Digital Power and Hyundai go up and down completely randomly.
Pair Corralation between Digital Power and Hyundai
Assuming the 90 days trading horizon Digital Power Communications is expected to generate 1.05 times more return on investment than Hyundai. However, Digital Power is 1.05 times more volatile than Hyundai Motor. It trades about 0.13 of its potential returns per unit of risk. Hyundai Motor is currently generating about -0.01 per unit of risk. If you would invest 809,000 in Digital Power Communications on September 4, 2024 and sell it today you would earn a total of 50,000 from holding Digital Power Communications or generate 6.18% 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. Hyundai Motor
Performance |
| Timeline |
| Digital Power Commun |
| Hyundai Motor |
Digital Power and Hyundai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Power and Hyundai
The main advantage of trading using opposite Digital Power and Hyundai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Power position performs unexpectedly, Hyundai 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 Hyundai will offset losses from the drop in Hyundai's long position.| Digital Power vs. AptaBio Therapeutics | Digital Power vs. Daewoo SBI SPAC | Digital Power vs. Dream Security co | Digital Power vs. Microfriend |
| Hyundai vs. Eagon Industrial Co | Hyundai vs. Digital Power Communications | Hyundai vs. Songwon Industrial Co | Hyundai vs. Ssangyong Information Communication |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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