Correlation Between Digital Power and Jeju Bank
Can any of the company-specific risk be diversified away by investing in both Digital Power and Jeju Bank 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 Jeju Bank 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 Jeju Bank, you can compare the effects of market volatilities on Digital Power and Jeju Bank 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 Jeju Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Power and Jeju Bank.
Diversification Opportunities for Digital Power and Jeju Bank
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Digital and Jeju is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Digital Power Communications and Jeju Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeju Bank 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 Jeju Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeju Bank has no effect on the direction of Digital Power i.e., Digital Power and Jeju Bank go up and down completely randomly.
Pair Corralation between Digital Power and Jeju Bank
Assuming the 90 days trading horizon Digital Power Communications is expected to generate 0.98 times more return on investment than Jeju Bank. However, Digital Power Communications is 1.02 times less risky than Jeju Bank. It trades about -0.25 of its potential returns per unit of risk. Jeju Bank is currently generating about -0.35 per unit of risk. If you would invest 863,000 in Digital Power Communications on October 29, 2024 and sell it today you would lose (45,000) from holding Digital Power Communications or give up 5.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Digital Power Communications vs. Jeju Bank
Performance |
| Timeline |
| Digital Power Commun |
| Jeju Bank |
Digital Power and Jeju Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Power and Jeju Bank
The main advantage of trading using opposite Digital Power and Jeju Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Power position performs unexpectedly, Jeju Bank 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 Jeju Bank will offset losses from the drop in Jeju Bank's long position.| Digital Power vs. HB Technology TD | Digital Power vs. Puloon Technology | Digital Power vs. Kbi Metal Co | Digital Power vs. Korean Drug Co |
| Jeju Bank vs. Heungkuk Metaltech CoLtd | Jeju Bank vs. Duksan Hi Metal | Jeju Bank vs. Homecast CoLtd | Jeju Bank vs. Jeju Semiconductor Corp |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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