Correlation Between Digital Power and Settlebank
Can any of the company-specific risk be diversified away by investing in both Digital Power and Settlebank 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 Settlebank 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 Settlebank, you can compare the effects of market volatilities on Digital Power and Settlebank 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 Settlebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Power and Settlebank.
Diversification Opportunities for Digital Power and Settlebank
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Digital and Settlebank is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Digital Power Communications and Settlebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Settlebank 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 Settlebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Settlebank has no effect on the direction of Digital Power i.e., Digital Power and Settlebank go up and down completely randomly.
Pair Corralation between Digital Power and Settlebank
Assuming the 90 days trading horizon Digital Power Communications is expected to generate 0.82 times more return on investment than Settlebank. However, Digital Power Communications is 1.22 times less risky than Settlebank. It trades about -0.02 of its potential returns per unit of risk. Settlebank is currently generating about -0.09 per unit of risk. If you would invest 863,112 in Digital Power Communications on November 2, 2024 and sell it today you would lose (45,112) from holding Digital Power Communications or give up 5.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Digital Power Communications vs. Settlebank
Performance |
| Timeline |
| Digital Power Commun |
| Settlebank |
Digital Power and Settlebank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Power and Settlebank
The main advantage of trading using opposite Digital Power and Settlebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Power position performs unexpectedly, Settlebank 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 Settlebank will offset losses from the drop in Settlebank's long position.| Digital Power vs. Inzi Display CoLtd | Digital Power vs. Tuksu Engineering ConstructionLtd | Digital Power vs. Korea Computer | Digital Power vs. LG Display Co |
| Settlebank vs. DoubleU Games Co | Settlebank vs. Kakao Games Corp | Settlebank vs. Hanwha Chemical Corp | Settlebank vs. KPX Green Chemical |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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