Correlation Between Pan Entertainment and Digital Imaging

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

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

Diversification Opportunities for Pan Entertainment and Digital Imaging

0.74

Correlation Coefficient

Pan Entertainment  Digital Imaging

Poor diversification

The 3 months correlation between Pan and Digital is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Pan Entertainment Co 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 Pan Entertainment 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 Pan Entertainment Co 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 Pan Entertainment i.e., Pan Entertainment and Digital Imaging go up and down completely randomly.

Pair Corralation between Pan Entertainment and Digital Imaging

Assuming the 90 days trading horizon Pan Entertainment is expected to generate 2.91 times less return on investment than Digital Imaging. But when comparing it to its historical volatility, Pan Entertainment Co is 2.4 times less risky than Digital Imaging. It trades about 0.32 of its potential returns per unit of risk. Digital Imaging Technology is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  1,290,000  in Digital Imaging Technology on October 25, 2024 and sell it today you would earn a total of  534,000  from holding Digital Imaging Technology or generate 41.4% return on investment over 90 days.

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

Pan Entertainment Co  vs.  Digital Imaging Technology

Pan Entertainment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pan Entertainment Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pan Entertainment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Digital Imaging Tech

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Imaging Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Digital Imaging sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pan Entertainment and Digital Imaging

The main advantage of trading using opposite Pan Entertainment and Digital Imaging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pan Entertainment 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 Pan Entertainment Co 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.