Correlation Between Digital Power and AurosTechnology
Can any of the company-specific risk be diversified away by investing in both Digital Power and AurosTechnology 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 AurosTechnology 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 AurosTechnology, you can compare the effects of market volatilities on Digital Power and AurosTechnology 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 AurosTechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Power and AurosTechnology.
Diversification Opportunities for Digital Power and AurosTechnology
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Digital and AurosTechnology is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Digital Power Communications and AurosTechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AurosTechnology 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 AurosTechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AurosTechnology has no effect on the direction of Digital Power i.e., Digital Power and AurosTechnology go up and down completely randomly.
Pair Corralation between Digital Power and AurosTechnology
Assuming the 90 days trading horizon Digital Power Communications is expected to generate 0.51 times more return on investment than AurosTechnology. However, Digital Power Communications is 1.95 times less risky than AurosTechnology. It trades about 0.05 of its potential returns per unit of risk. AurosTechnology is currently generating about 0.02 per unit of risk. If you would invest 549,607 in Digital Power Communications on September 3, 2024 and sell it today you would earn a total of 278,393 from holding Digital Power Communications or generate 50.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Digital Power Communications vs. AurosTechnology
Performance |
| Timeline |
| Digital Power Commun |
| AurosTechnology |
Digital Power and AurosTechnology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Power and AurosTechnology
The main advantage of trading using opposite Digital Power and AurosTechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Power position performs unexpectedly, AurosTechnology 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 AurosTechnology will offset losses from the drop in AurosTechnology's long position.| Digital Power vs. Daol Investment Securities | Digital Power vs. Stic Investments | Digital Power vs. DB Financial Investment | Digital Power vs. Kbi Metal 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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