Correlation Between Digital Power and PI Advanced
Can any of the company-specific risk be diversified away by investing in both Digital Power and PI Advanced 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 PI Advanced 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 PI Advanced Materials, you can compare the effects of market volatilities on Digital Power and PI Advanced 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 PI Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Power and PI Advanced.
Diversification Opportunities for Digital Power and PI Advanced
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Digital and 178920 is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Digital Power Communications and PI Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PI Advanced Materials 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 PI Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PI Advanced Materials has no effect on the direction of Digital Power i.e., Digital Power and PI Advanced go up and down completely randomly.
Pair Corralation between Digital Power and PI Advanced
Assuming the 90 days trading horizon Digital Power Communications is expected to under-perform the PI Advanced. But the stock apears to be less risky and, when comparing its historical volatility, Digital Power Communications is 2.16 times less risky than PI Advanced. The stock trades about -0.1 of its potential returns per unit of risk. The PI Advanced Materials is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 1,680,000 in PI Advanced Materials on October 16, 2024 and sell it today you would earn a total of 208,000 from holding PI Advanced Materials or generate 12.38% 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. PI Advanced Materials
Performance |
| Timeline |
| Digital Power Commun |
| PI Advanced Materials |
Digital Power and PI Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Power and PI Advanced
The main advantage of trading using opposite Digital Power and PI Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Power position performs unexpectedly, PI Advanced 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 PI Advanced will offset losses from the drop in PI Advanced's long position.| Digital Power vs. Organic Special Pet | Digital Power vs. Samlip General Foods | Digital Power vs. CJ Seafood Corp | Digital Power vs. Sangsin Energy Display |
| PI Advanced vs. Ecoplastic | PI Advanced vs. Alton Sports CoLtd | PI Advanced vs. Daejoo Electronic Materials | PI Advanced vs. Ssangyong Materials Corp |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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