Correlation Between Hanil Chemical and Digital Power

Can any of the company-specific risk be diversified away by investing in both Hanil Chemical 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 Hanil Chemical and Digital Power into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hanil Chemical Ind and Digital Power Communications, you can compare the effects of market volatilities on Hanil Chemical 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 Hanil Chemical with a short position of Digital Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanil Chemical and Digital Power.

Diversification Opportunities for Hanil Chemical and Digital Power

0.1

Correlation Coefficient

Hanil Chemical  Digital Power

Average diversification

The 3 months correlation between Hanil and Digital is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Hanil Chemical Ind 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 Hanil Chemical 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 Hanil Chemical Ind 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 Hanil Chemical i.e., Hanil Chemical and Digital Power go up and down completely randomly.

Pair Corralation between Hanil Chemical and Digital Power

Assuming the 90 days trading horizon Hanil Chemical is expected to generate 345.75 times less return on investment than Digital Power. In addition to that, Hanil Chemical is 1.61 times more volatile than Digital Power Communications. It trades about 0.0 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  501,465  in Digital Power Communications on September 19, 2024 and sell it today you would earn a total of  359,535  from holding Digital Power Communications or generate 71.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Hanil Chemical Ind  vs.  Digital Power Communications

Hanil Chemical Ind

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanil Chemical Ind has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hanil Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Digital Power Commun

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Power Communications are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Digital Power may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hanil Chemical and Digital Power

The main advantage of trading using opposite Hanil Chemical and Digital Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanil Chemical 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 Hanil Chemical Ind 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.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.