Correlation Between Digital Power and Woorim Machinery
Can any of the company-specific risk be diversified away by investing in both Digital Power and Woorim Machinery 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 Woorim Machinery 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 Woorim Machinery Co, you can compare the effects of market volatilities on Digital Power and Woorim Machinery 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 Woorim Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Power and Woorim Machinery.
Diversification Opportunities for Digital Power and Woorim Machinery
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Digital and Woorim is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Digital Power Communications and Woorim Machinery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woorim Machinery 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 Woorim Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woorim Machinery has no effect on the direction of Digital Power i.e., Digital Power and Woorim Machinery go up and down completely randomly.
Pair Corralation between Digital Power and Woorim Machinery
Assuming the 90 days trading horizon Digital Power is expected to generate 5.62 times less return on investment than Woorim Machinery. But when comparing it to its historical volatility, Digital Power Communications is 2.31 times less risky than Woorim Machinery. It trades about 0.07 of its potential returns per unit of risk. Woorim Machinery Co is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 476,000 in Woorim Machinery Co on October 13, 2024 and sell it today you would earn a total of 51,000 from holding Woorim Machinery Co or generate 10.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Digital Power Communications vs. Woorim Machinery Co
Performance |
| Timeline |
| Digital Power Commun |
| Woorim Machinery |
Digital Power and Woorim Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Power and Woorim Machinery
The main advantage of trading using opposite Digital Power and Woorim Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Power position performs unexpectedly, Woorim Machinery 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 Woorim Machinery will offset losses from the drop in Woorim Machinery's long position.| Digital Power vs. Taegu Broadcasting | Digital Power vs. Nam Hwa Construction | Digital Power vs. Seohee Construction Co | Digital Power vs. Iljin Display |
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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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