Correlation Between Digital Power and THiRA UTECH

Can any of the company-specific risk be diversified away by investing in both Digital Power and THiRA UTECH 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 THiRA UTECH 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 THiRA UTECH LTD, you can compare the effects of market volatilities on Digital Power and THiRA UTECH 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 THiRA UTECH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Power and THiRA UTECH.

Diversification Opportunities for Digital Power and THiRA UTECH

-0.64

Correlation Coefficient

Digital Power  THiRA UTECH

Excellent diversification

The 3 months correlation between Digital and THiRA is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Digital Power Communications and THiRA UTECH LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THiRA UTECH LTD 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 THiRA UTECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THiRA UTECH LTD has no effect on the direction of Digital Power i.e., Digital Power and THiRA UTECH go up and down completely randomly.

Pair Corralation between Digital Power and THiRA UTECH

Assuming the 90 days trading horizon Digital Power is expected to generate 70.96 times less return on investment than THiRA UTECH. But when comparing it to its historical volatility, Digital Power Communications is 1.79 times less risky than THiRA UTECH. It trades about 0.0 of its potential returns per unit of risk. THiRA UTECH LTD is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  462,500  in THiRA UTECH LTD on December 26, 2024 and sell it today you would earn a total of  88,500  from holding THiRA UTECH LTD or generate 19.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

Digital Power Communications  vs.  THiRA UTECH LTD

Digital Power Commun

Risk-Adjusted Performance

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.

THiRA UTECH LTD

Risk-Adjusted Performance

OK

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

Pair Trading with Digital Power and THiRA UTECH

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

The idea behind Digital Power Communications and THiRA UTECH LTD 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.