Correlation Between Digital Power and Finebesteel
Can any of the company-specific risk be diversified away by investing in both Digital Power and Finebesteel 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 Finebesteel 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 Finebesteel, you can compare the effects of market volatilities on Digital Power and Finebesteel 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 Finebesteel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Power and Finebesteel.
Diversification Opportunities for Digital Power and Finebesteel
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Digital and Finebesteel is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Digital Power Communications and Finebesteel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finebesteel 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 Finebesteel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finebesteel has no effect on the direction of Digital Power i.e., Digital Power and Finebesteel go up and down completely randomly.
Pair Corralation between Digital Power and Finebesteel
Assuming the 90 days trading horizon Digital Power Communications is expected to under-perform the Finebesteel. But the stock apears to be less risky and, when comparing its historical volatility, Digital Power Communications is 2.42 times less risky than Finebesteel. The stock trades about -0.19 of its potential returns per unit of risk. The Finebesteel is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 92,100 in Finebesteel on November 5, 2024 and sell it today you would earn a total of 14,400 from holding Finebesteel or generate 15.64% 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. Finebesteel
Performance |
| Timeline |
| Digital Power Commun |
| Finebesteel |
Digital Power and Finebesteel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Power and Finebesteel
The main advantage of trading using opposite Digital Power and Finebesteel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Power position performs unexpectedly, Finebesteel 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 Finebesteel will offset losses from the drop in Finebesteel'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 |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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