Correlation Between Digital Power and Eagon Industrial
Can any of the company-specific risk be diversified away by investing in both Digital Power and Eagon Industrial 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 Eagon Industrial 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 Eagon Industrial Co, you can compare the effects of market volatilities on Digital Power and Eagon Industrial 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 Eagon Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Power and Eagon Industrial.
Diversification Opportunities for Digital Power and Eagon Industrial
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Digital and Eagon is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Digital Power Communications and Eagon Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagon Industrial 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 Eagon Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagon Industrial has no effect on the direction of Digital Power i.e., Digital Power and Eagon Industrial go up and down completely randomly.
Pair Corralation between Digital Power and Eagon Industrial
Assuming the 90 days trading horizon Digital Power Communications is expected to under-perform the Eagon Industrial. In addition to that, Digital Power is 1.34 times more volatile than Eagon Industrial Co. It trades about -0.06 of its total potential returns per unit of risk. Eagon Industrial Co is currently generating about -0.02 per unit of volatility. If you would invest 540,000 in Eagon Industrial Co on September 3, 2024 and sell it today you would lose (36,000) from holding Eagon Industrial Co or give up 6.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Digital Power Communications vs. Eagon Industrial Co
Performance |
| Timeline |
| Digital Power Commun |
| Eagon Industrial |
Digital Power and Eagon Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Power and Eagon Industrial
The main advantage of trading using opposite Digital Power and Eagon Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Power position performs unexpectedly, Eagon Industrial 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 Eagon Industrial will offset losses from the drop in Eagon Industrial's long position.| Digital Power vs. Daol Investment Securities | Digital Power vs. Stic Investments | Digital Power vs. DB Financial Investment | Digital Power vs. Kbi Metal Co |
| Eagon Industrial vs. CU Tech Corp | Eagon Industrial vs. Konan Technology | Eagon Industrial vs. Digital Power Communications | Eagon Industrial vs. Sungchang Autotech Co |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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