Correlation Between Daol Investment and Digital Power
Can any of the company-specific risk be diversified away by investing in both Daol Investment and Digital Power 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 Daol Investment and Digital Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daol Investment Securities and Digital Power Communications, you can compare the effects of market volatilities on Daol Investment and Digital Power 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 Daol Investment with a short position of Digital Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daol Investment and Digital Power.
Diversification Opportunities for Daol Investment and Digital Power
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Daol and Digital is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Daol Investment Securities and Digital Power Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Power Commun and Daol Investment 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 Daol Investment Securities are associated (or correlated) with Digital Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Power Commun has no effect on the direction of Daol Investment i.e., Daol Investment and Digital Power go up and down completely randomly.
Pair Corralation between Daol Investment and Digital Power
Assuming the 90 days trading horizon Daol Investment Securities is expected to under-perform the Digital Power. But the stock apears to be less risky and, when comparing its historical volatility, Daol Investment Securities is 1.29 times less risky than Digital Power. The stock trades about -0.19 of its potential returns per unit of risk. The Digital Power Communications is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 809,000 in Digital Power Communications on September 3, 2024 and sell it today you would earn a total of 19,000 from holding Digital Power Communications or generate 2.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daol Investment Securities vs. Digital Power Communications
Performance |
| Timeline |
| Daol Investment Secu |
| Digital Power Commun |
Daol Investment and Digital Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daol Investment and Digital Power
The main advantage of trading using opposite Daol Investment and Digital Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daol Investment position performs unexpectedly, Digital Power 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 Digital Power will offset losses from the drop in Digital Power's long position.| Daol Investment vs. Samsung Electronics Co | Daol Investment vs. Samsung Electronics Co | Daol Investment vs. LG Energy Solution | Daol Investment vs. SK Hynix |
| Digital Power vs. Daol Investment Securities | Digital Power vs. Stic Investments | Digital Power vs. DB Financial Investment | Digital Power vs. Kbi Metal Co |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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