Correlation Between Moonbae Steel and Digital Power

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

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

Diversification Opportunities for Moonbae Steel and Digital Power

-0.07

Correlation Coefficient

Moonbae Steel  Digital Power

Good diversification

The 3 months correlation between Moonbae and Digital is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Moonbae Steel 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 Moonbae Steel 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 Moonbae Steel 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 Moonbae Steel i.e., Moonbae Steel and Digital Power go up and down completely randomly.

Pair Corralation between Moonbae Steel and Digital Power

Assuming the 90 days trading horizon Moonbae Steel is expected to generate 0.94 times more return on investment than Digital Power. However, Moonbae Steel is 1.07 times less risky than Digital Power. It trades about 0.16 of its potential returns per unit of risk. Digital Power Communications is currently generating about 0.13 per unit of risk. If you would invest  223,000  in Moonbae Steel on October 11, 2024 and sell it today you would earn a total of  11,000  from holding Moonbae Steel or generate 4.93% return on investment over 90 days.

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

Moonbae Steel  vs.  Digital Power Communications

Moonbae Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Moonbae Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Moonbae Steel 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

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Power Communications are ranked lower than 6 (%) 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 February 2025.

Pair Trading with Moonbae Steel and Digital Power

The main advantage of trading using opposite Moonbae Steel and Digital Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moonbae Steel 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 Moonbae Steel 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 Stocks Directory module to find actively traded stocks across global markets.