Correlation Between Digital Power and Daechang Steel
Can any of the company-specific risk be diversified away by investing in both Digital Power and Daechang Steel 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 Daechang Steel 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 Daechang Steel Co, you can compare the effects of market volatilities on Digital Power and Daechang Steel 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 Daechang Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Power and Daechang Steel.
Diversification Opportunities for Digital Power and Daechang Steel
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Digital and Daechang is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Digital Power Communications and Daechang Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daechang Steel 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 Daechang Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daechang Steel has no effect on the direction of Digital Power i.e., Digital Power and Daechang Steel go up and down completely randomly.
Pair Corralation between Digital Power and Daechang Steel
Assuming the 90 days trading horizon Digital Power Communications is expected to under-perform the Daechang Steel. In addition to that, Digital Power is 1.07 times more volatile than Daechang Steel Co. It trades about -0.19 of its total potential returns per unit of risk. Daechang Steel Co is currently generating about 0.04 per unit of volatility. If you would invest 203,500 in Daechang Steel Co on November 5, 2024 and sell it today you would earn a total of 1,500 from holding Daechang Steel Co or generate 0.74% 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. Daechang Steel Co
Performance |
| Timeline |
| Digital Power Commun |
| Daechang Steel |
Digital Power and Daechang Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Power and Daechang Steel
The main advantage of trading using opposite Digital Power and Daechang Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Power position performs unexpectedly, Daechang Steel 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 Daechang Steel will offset losses from the drop in Daechang Steel'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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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