Correlation Between CG Hi and Digital Imaging
Can any of the company-specific risk be diversified away by investing in both CG Hi and Digital Imaging 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 CG Hi and Digital Imaging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CG Hi Tech and Digital Imaging Technology, you can compare the effects of market volatilities on CG Hi and Digital Imaging 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 CG Hi with a short position of Digital Imaging. Check out your portfolio center. Please also check ongoing floating volatility patterns of CG Hi and Digital Imaging.
Diversification Opportunities for CG Hi and Digital Imaging
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 264660 and Digital is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding CG Hi Tech and Digital Imaging Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Imaging Tech and CG Hi 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 CG Hi Tech are associated (or correlated) with Digital Imaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Imaging Tech has no effect on the direction of CG Hi i.e., CG Hi and Digital Imaging go up and down completely randomly.
Pair Corralation between CG Hi and Digital Imaging
Assuming the 90 days trading horizon CG Hi is expected to generate 1.84 times less return on investment than Digital Imaging. But when comparing it to its historical volatility, CG Hi Tech is 1.08 times less risky than Digital Imaging. It trades about 0.23 of its potential returns per unit of risk. Digital Imaging Technology is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 1,290,000 in Digital Imaging Technology on October 25, 2024 and sell it today you would earn a total of 534,000 from holding Digital Imaging Technology or generate 41.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CG Hi Tech vs. Digital Imaging Technology
Performance |
| Timeline |
| CG Hi Tech |
| Digital Imaging Tech |
CG Hi and Digital Imaging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CG Hi and Digital Imaging
The main advantage of trading using opposite CG Hi and Digital Imaging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CG Hi position performs unexpectedly, Digital Imaging 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 Imaging will offset losses from the drop in Digital Imaging's long position.The idea behind CG Hi Tech and Digital Imaging Technology 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.| Digital Imaging vs. Dongbu Insurance Co | Digital Imaging vs. CG Hi Tech | Digital Imaging vs. Wireless Power Amplifier | Digital Imaging vs. DB Insurance 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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