Correlation Between Digital Power and Daiyang Metal

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

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

Diversification Opportunities for Digital Power and Daiyang Metal

0.18

Correlation Coefficient

Digital Power  Daiyang Metal

Average diversification

The 3 months correlation between Digital and Daiyang is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Digital Power Communications and Daiyang Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daiyang Metal and Digital Power 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 Digital Power Communications are associated (or correlated) with Daiyang Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daiyang Metal has no effect on the direction of Digital Power i.e., Digital Power and Daiyang Metal go up and down completely randomly.

Pair Corralation between Digital Power and Daiyang Metal

Assuming the 90 days trading horizon Digital Power Communications is expected to generate 0.45 times more return on investment than Daiyang Metal. However, Digital Power Communications is 2.2 times less risky than Daiyang Metal. It trades about 0.06 of its potential returns per unit of risk. Daiyang Metal Co is currently generating about 0.0 per unit of risk. If you would invest  527,953  in Digital Power Communications on October 9, 2024 and sell it today you would earn a total of  345,047  from holding Digital Power Communications or generate 65.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.96%
Values	Daily Returns

Digital Power Communications  vs.  Daiyang Metal Co

Digital Power Commun

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Power Communications are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Digital Power sustained solid returns over the last few months and may actually be approaching a breakup point.

Daiyang Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daiyang Metal Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Digital Power and Daiyang Metal

The main advantage of trading using opposite Digital Power and Daiyang Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Power position performs unexpectedly, Daiyang Metal 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 Daiyang Metal will offset losses from the drop in Daiyang Metal's long position.

The idea behind Digital Power Communications and Daiyang Metal Co 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.