Correlation Between Digital Power and Daewon Chemical
Can any of the company-specific risk be diversified away by investing in both Digital Power and Daewon Chemical 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 Daewon Chemical 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 Daewon Chemical Co, you can compare the effects of market volatilities on Digital Power and Daewon Chemical 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 Daewon Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Power and Daewon Chemical.
Diversification Opportunities for Digital Power and Daewon Chemical
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Digital and Daewon is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Digital Power Communications and Daewon Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daewon Chemical 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 Daewon Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daewon Chemical has no effect on the direction of Digital Power i.e., Digital Power and Daewon Chemical go up and down completely randomly.
Pair Corralation between Digital Power and Daewon Chemical
Assuming the 90 days trading horizon Digital Power Communications is expected to under-perform the Daewon Chemical. In addition to that, Digital Power is 1.58 times more volatile than Daewon Chemical Co. It trades about -0.06 of its total potential returns per unit of risk. Daewon Chemical Co is currently generating about 0.06 per unit of volatility. If you would invest 101,900 in Daewon Chemical Co on October 12, 2024 and sell it today you would earn a total of 1,000.00 from holding Daewon Chemical Co or generate 0.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Digital Power Communications vs. Daewon Chemical Co
Performance |
| Timeline |
| Digital Power Commun |
| Daewon Chemical |
Digital Power and Daewon Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Power and Daewon Chemical
The main advantage of trading using opposite Digital Power and Daewon Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Power position performs unexpectedly, Daewon Chemical 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 Daewon Chemical will offset losses from the drop in Daewon Chemical's long position.| Digital Power vs. Namhwa Industrial Co | Digital Power vs. Echomarketing CoLtd | Digital Power vs. Aprogen Healthcare Games | Digital Power vs. LG Household Healthcare |
| Daewon Chemical vs. Neungyule Education | Daewon Chemical vs. Digital Power Communications | Daewon Chemical vs. Sangsin Energy Display | Daewon Chemical vs. Wireless Power Amplifier |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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