Correlation Between PLAYWITH and Digital Imaging

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

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

Diversification Opportunities for PLAYWITH and Digital Imaging

0.77

Correlation Coefficient

PLAYWITH  Digital Imaging

Poor diversification

The 3 months correlation between PLAYWITH and Digital is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding PLAYWITH 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 PLAYWITH 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 PLAYWITH 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 PLAYWITH i.e., PLAYWITH and Digital Imaging go up and down completely randomly.

Pair Corralation between PLAYWITH and Digital Imaging

Assuming the 90 days trading horizon PLAYWITH is expected to under-perform the Digital Imaging. But the stock apears to be less risky and, when comparing its historical volatility, PLAYWITH is 1.63 times less risky than Digital Imaging. The stock trades about -0.23 of its potential returns per unit of risk. The Digital Imaging Technology is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,408,000  in Digital Imaging Technology on October 6, 2024 and sell it today you would lose (69,000) from holding Digital Imaging Technology or give up 4.9% of portfolio value over 90 days.

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

PLAYWITH  vs.  Digital Imaging Technology

PLAYWITH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PLAYWITH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Digital Imaging Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digital Imaging Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with PLAYWITH and Digital Imaging

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

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.