Correlation Between Digital Power and Formetal
Can any of the company-specific risk be diversified away by investing in both Digital Power and Formetal 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 Formetal 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 Formetal Co, you can compare the effects of market volatilities on Digital Power and Formetal 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 Formetal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Power and Formetal.
Diversification Opportunities for Digital Power and Formetal
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Digital and Formetal is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Digital Power Communications and Formetal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formetal 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 Formetal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formetal has no effect on the direction of Digital Power i.e., Digital Power and Formetal go up and down completely randomly.
Pair Corralation between Digital Power and Formetal
Assuming the 90 days trading horizon Digital Power is expected to generate 6.45 times less return on investment than Formetal. But when comparing it to its historical volatility, Digital Power Communications is 2.18 times less risky than Formetal. It trades about 0.05 of its potential returns per unit of risk. Formetal Co is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 273,947 in Formetal Co on October 26, 2024 and sell it today you would earn a total of 117,053 from holding Formetal Co or generate 42.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Digital Power Communications vs. Formetal Co
Performance |
| Timeline |
| Digital Power Commun |
| Formetal |
Digital Power and Formetal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Power and Formetal
The main advantage of trading using opposite Digital Power and Formetal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Power position performs unexpectedly, Formetal 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 Formetal will offset losses from the drop in Formetal's long position.| Digital Power vs. KB Financial Group | Digital Power vs. Shinhan Financial Group | Digital Power vs. Hana Financial | Digital Power vs. Woori Financial Group |
| Formetal vs. NH Investment Securities | Formetal vs. Digital Power Communications | Formetal vs. DSC Investment | Formetal vs. BGF Retail 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes |