Correlation Between Digital Power and KPX Chemical
Can any of the company-specific risk be diversified away by investing in both Digital Power and KPX 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 KPX 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 KPX Chemical, you can compare the effects of market volatilities on Digital Power and KPX 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 KPX Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Power and KPX Chemical.
Diversification Opportunities for Digital Power and KPX Chemical
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Digital and KPX is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Digital Power Communications and KPX Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KPX 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 KPX Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KPX Chemical has no effect on the direction of Digital Power i.e., Digital Power and KPX Chemical go up and down completely randomly.
Pair Corralation between Digital Power and KPX Chemical
Assuming the 90 days trading horizon Digital Power Communications is expected to generate 1.54 times more return on investment than KPX Chemical. However, Digital Power is 1.54 times more volatile than KPX Chemical. It trades about 0.44 of its potential returns per unit of risk. KPX Chemical is currently generating about -0.06 per unit of risk. If you would invest 715,000 in Digital Power Communications on September 14, 2024 and sell it today you would earn a total of 148,000 from holding Digital Power Communications or generate 20.7% 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. KPX Chemical
Performance |
| Timeline |
| Digital Power Commun |
| KPX Chemical |
Digital Power and KPX Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Power and KPX Chemical
The main advantage of trading using opposite Digital Power and KPX Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Power position performs unexpectedly, KPX 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 KPX Chemical will offset losses from the drop in KPX Chemical's long position.| Digital Power vs. Samsung Electronics Co | Digital Power vs. Samsung Electronics Co | Digital Power vs. SK Hynix | Digital Power vs. POSCO Holdings |
| KPX Chemical vs. Formetal Co | KPX Chemical vs. Songwon Industrial Co | KPX Chemical vs. Digital Power Communications | KPX Chemical vs. Dongwon Metal 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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