Correlation Between Digital Power and GS Retail
Can any of the company-specific risk be diversified away by investing in both Digital Power and GS Retail 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 GS Retail 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 GS Retail Co, you can compare the effects of market volatilities on Digital Power and GS Retail 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 GS Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Power and GS Retail.
Diversification Opportunities for Digital Power and GS Retail
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Digital and 007070 is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Digital Power Communications and GS Retail Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GS Retail 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 GS Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GS Retail has no effect on the direction of Digital Power i.e., Digital Power and GS Retail go up and down completely randomly.
Pair Corralation between Digital Power and GS Retail
Assuming the 90 days trading horizon Digital Power Communications is expected to under-perform the GS Retail. But the stock apears to be less risky and, when comparing its historical volatility, Digital Power Communications is 1.11 times less risky than GS Retail. The stock trades about -0.04 of its potential returns per unit of risk. The GS Retail Co is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,110,000 in GS Retail Co on August 25, 2024 and sell it today you would earn a total of 150,000 from holding GS Retail Co or generate 7.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Digital Power Communications vs. GS Retail Co
Performance |
| Timeline |
| Digital Power Commun |
| GS Retail |
Digital Power and GS Retail Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Power and GS Retail
The main advantage of trading using opposite Digital Power and GS Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Power position performs unexpectedly, GS Retail 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 GS Retail will offset losses from the drop in GS Retail's long position.| Digital Power vs. AptaBio Therapeutics | Digital Power vs. Daewoo SBI SPAC | Digital Power vs. Dream Security co | Digital Power vs. Microfriend |
| GS Retail vs. Nice Information Telecommunication | GS Retail vs. Digital Power Communications | GS Retail vs. iNtRON Biotechnology | GS Retail vs. Daishin Information Communications |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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