Correlation Between Digital Power and LG Electronics
Can any of the company-specific risk be diversified away by investing in both Digital Power and LG Electronics 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 LG Electronics 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 LG Electronics, you can compare the effects of market volatilities on Digital Power and LG Electronics 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 LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Power and LG Electronics.
Diversification Opportunities for Digital Power and LG Electronics
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Digital and 066570 is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Digital Power Communications and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics 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 LG Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Electronics has no effect on the direction of Digital Power i.e., Digital Power and LG Electronics go up and down completely randomly.
Pair Corralation between Digital Power and LG Electronics
Assuming the 90 days trading horizon Digital Power Communications is expected to generate 1.14 times more return on investment than LG Electronics. However, Digital Power is 1.14 times more volatile than LG Electronics. It trades about -0.04 of its potential returns per unit of risk. LG Electronics is currently generating about -0.1 per unit of risk. If you would invest 799,000 in Digital Power Communications on August 25, 2024 and sell it today you would lose (19,000) from holding Digital Power Communications or give up 2.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Digital Power Communications vs. LG Electronics
Performance |
| Timeline |
| Digital Power Commun |
| LG Electronics |
Digital Power and LG Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Power and LG Electronics
The main advantage of trading using opposite Digital Power and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Power position performs unexpectedly, LG Electronics 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 LG Electronics will offset losses from the drop in LG Electronics' long position.| Digital Power vs. AptaBio Therapeutics | Digital Power vs. Daewoo SBI SPAC | Digital Power vs. Dream Security co | Digital Power vs. Microfriend |
| LG Electronics vs. Seoul Electronics Telecom | LG Electronics vs. Organic Special Pet | LG Electronics vs. Digital Power Communications | LG Electronics vs. Kisan Telecom 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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