Correlation Between Stic Investments and Digital Power

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

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

Diversification Opportunities for Stic Investments and Digital Power

1.0

Correlation Coefficient

Stic Investments  Digital Power

No risk reduction

The 3 months correlation between Stic and Digital is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Stic Investments 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 Stic Investments 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 Stic Investments 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 Stic Investments i.e., Stic Investments and Digital Power go up and down completely randomly.

Pair Corralation between Stic Investments and Digital Power

Assuming the 90 days trading horizon If you would invest  888,000  in Digital Power Communications on September 3, 2024 and sell it today you would lose (60,000) from holding Digital Power Communications or give up 6.76% of portfolio value over 90 days.

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

Stic Investments  vs.  Digital Power Communications

Stic Investments

Risk-Adjusted Performance

0 of 100

Very Weak

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

0 of 100

Very Weak

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

Pair Trading with Stic Investments and Digital Power

The main advantage of trading using opposite Stic Investments and Digital Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stic Investments 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 Stic Investments 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.