Correlation Between Digital Multimedia and Shinsegae Engineering
Can any of the company-specific risk be diversified away by investing in both Digital Multimedia and Shinsegae Engineering 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 Multimedia and Shinsegae Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Digital Multimedia Technology and Shinsegae Engineering Construction, you can compare the effects of market volatilities on Digital Multimedia and Shinsegae Engineering 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 Multimedia with a short position of Shinsegae Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Multimedia and Shinsegae Engineering.
Diversification Opportunities for Digital Multimedia and Shinsegae Engineering
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Digital and Shinsegae is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Digital Multimedia Technology and Shinsegae Engineering Construc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinsegae Engineering and Digital Multimedia 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 Multimedia Technology are associated (or correlated) with Shinsegae Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinsegae Engineering has no effect on the direction of Digital Multimedia i.e., Digital Multimedia and Shinsegae Engineering go up and down completely randomly.
Pair Corralation between Digital Multimedia and Shinsegae Engineering
Assuming the 90 days trading horizon Digital Multimedia Technology is expected to under-perform the Shinsegae Engineering. In addition to that, Digital Multimedia is 45.36 times more volatile than Shinsegae Engineering Construction. It trades about -0.26 of its total potential returns per unit of risk. Shinsegae Engineering Construction is currently generating about -0.25 per unit of volatility. If you would invest 1,811,000 in Shinsegae Engineering Construction on August 31, 2024 and sell it today you would lose (6,000) from holding Shinsegae Engineering Construction or give up 0.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Digital Multimedia Technology vs. Shinsegae Engineering Construc
Performance |
| Timeline |
| Digital Multimedia |
| Shinsegae Engineering |
Digital Multimedia and Shinsegae Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Multimedia and Shinsegae Engineering
The main advantage of trading using opposite Digital Multimedia and Shinsegae Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Multimedia position performs unexpectedly, Shinsegae Engineering 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 Shinsegae Engineering will offset losses from the drop in Shinsegae Engineering's long position.The idea behind Digital Multimedia Technology and Shinsegae Engineering Construction pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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