Correlation Between Digital Power and RF Materials
Can any of the company-specific risk be diversified away by investing in both Digital Power and RF Materials 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 RF Materials 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 RF Materials Co, you can compare the effects of market volatilities on Digital Power and RF Materials 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 RF Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Power and RF Materials.
Diversification Opportunities for Digital Power and RF Materials
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Digital and 327260 is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Digital Power Communications and RF Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RF 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 RF Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RF Materials has no effect on the direction of Digital Power i.e., Digital Power and RF Materials go up and down completely randomly.
Pair Corralation between Digital Power and RF Materials
Assuming the 90 days trading horizon Digital Power Communications is expected to under-perform the RF Materials. But the stock apears to be less risky and, when comparing its historical volatility, Digital Power Communications is 1.51 times less risky than RF Materials. The stock trades about -0.1 of its potential returns per unit of risk. The RF Materials Co is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 489,500 in RF Materials Co on October 16, 2024 and sell it today you would earn a total of 36,500 from holding RF Materials Co or generate 7.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Digital Power Communications vs. RF Materials Co
Performance |
| Timeline |
| Digital Power Commun |
| RF Materials |
Digital Power and RF Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Power and RF Materials
The main advantage of trading using opposite Digital Power and RF Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Power position performs unexpectedly, RF Materials 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 RF Materials will offset losses from the drop in RF Materials' 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 |
| RF Materials vs. Sempio Foods Co | RF Materials vs. Woori Technology Investment | RF Materials vs. JC Chemical Co | RF Materials vs. Hanil Chemical Ind |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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