Correlation Between Snap and Digital Power
Can any of the company-specific risk be diversified away by investing in both Snap 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 Snap and Digital Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Digital Power Communications, you can compare the effects of market volatilities on Snap 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 Snap with a short position of Digital Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Digital Power.
Diversification Opportunities for Snap and Digital Power
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Snap and Digital is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc 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 Snap 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 Snap Inc 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 Snap i.e., Snap and Digital Power go up and down completely randomly.
Pair Corralation between Snap and Digital Power
Given the investment horizon of 90 days Snap Inc is expected to under-perform the Digital Power. In addition to that, Snap is 1.48 times more volatile than Digital Power Communications. It trades about -0.03 of its total potential returns per unit of risk. Digital Power Communications is currently generating about 0.06 per unit of volatility. If you would invest 808,000 in Digital Power Communications on September 1, 2024 and sell it today you would earn a total of 20,000 from holding Digital Power Communications or generate 2.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Snap Inc vs. Digital Power Communications
Performance |
| Timeline |
| Snap Inc |
| Digital Power Commun |
Snap and Digital Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Digital Power
The main advantage of trading using opposite Snap and Digital Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap 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.The idea behind Snap Inc and Digital Power Communications 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 Power vs. AptaBio Therapeutics | Digital Power vs. Daewoo SBI SPAC | Digital Power vs. Dream Security co | Digital Power vs. Microfriend |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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