Correlation Between Digital Power and Korea Computer
Can any of the company-specific risk be diversified away by investing in both Digital Power and Korea Computer 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 Korea Computer 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 Korea Computer Systems, you can compare the effects of market volatilities on Digital Power and Korea Computer 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 Korea Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Power and Korea Computer.
Diversification Opportunities for Digital Power and Korea Computer
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Digital and Korea is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Digital Power Communications and Korea Computer Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Computer Systems 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 Korea Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Computer Systems has no effect on the direction of Digital Power i.e., Digital Power and Korea Computer go up and down completely randomly.
Pair Corralation between Digital Power and Korea Computer
Assuming the 90 days trading horizon Digital Power is expected to generate 2.75 times less return on investment than Korea Computer. But when comparing it to its historical volatility, Digital Power Communications is 2.38 times less risky than Korea Computer. It trades about 0.05 of its potential returns per unit of risk. Korea Computer Systems is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 544,913 in Korea Computer Systems on November 4, 2024 and sell it today you would earn a total of 556,087 from holding Korea Computer Systems or generate 102.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Digital Power Communications vs. Korea Computer Systems
Performance |
| Timeline |
| Digital Power Commun |
| Korea Computer Systems |
Digital Power and Korea Computer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Power and Korea Computer
The main advantage of trading using opposite Digital Power and Korea Computer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Power position performs unexpectedly, Korea Computer 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 Korea Computer will offset losses from the drop in Korea Computer's long position.| Digital Power vs. SCI Information Service | Digital Power vs. Korea Information Engineering | Digital Power vs. HB Technology TD | Digital Power vs. Sewoon Medical Co |
| Korea Computer vs. Settlebank | Korea Computer vs. Cafe24 Corp | Korea Computer vs. Daishin Information Communications | Korea Computer vs. SSR Inc |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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