Correlation Between Digital Power and Xavis
Can any of the company-specific risk be diversified away by investing in both Digital Power and Xavis 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 Xavis 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 Xavis Co, you can compare the effects of market volatilities on Digital Power and Xavis 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 Xavis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Power and Xavis.
Diversification Opportunities for Digital Power and Xavis
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Digital and Xavis is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Digital Power Communications and Xavis Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xavis 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 Xavis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xavis has no effect on the direction of Digital Power i.e., Digital Power and Xavis go up and down completely randomly.
Pair Corralation between Digital Power and Xavis
Assuming the 90 days trading horizon Digital Power Communications is expected to under-perform the Xavis. But the stock apears to be less risky and, when comparing its historical volatility, Digital Power Communications is 3.48 times less risky than Xavis. The stock trades about -0.39 of its potential returns per unit of risk. The Xavis Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 131,100 in Xavis Co on December 8, 2024 and sell it today you would earn a total of 22,300 from holding Xavis Co or generate 17.01% 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. Xavis Co
Performance |
| Timeline |
| Digital Power Commun |
| Xavis |
Digital Power and Xavis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Power and Xavis
The main advantage of trading using opposite Digital Power and Xavis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Power position performs unexpectedly, Xavis 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 Xavis will offset losses from the drop in Xavis' long position.| Digital Power vs. Daejoo Electronic Materials | ||
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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