Correlation Between Pan Entertainment and Digital Multimedia

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

Diversification Opportunities for Pan Entertainment and Digital Multimedia

0.4

Correlation Coefficient

Pan Entertainment  Digital Multimedia

Very weak diversification

The 3 months correlation between Pan and Digital is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Pan Entertainment Co and Digital Multimedia Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Multimedia 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 Multimedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Multimedia has no effect on the direction of Pan Entertainment i.e., Pan Entertainment and Digital Multimedia go up and down completely randomly.

Pair Corralation between Pan Entertainment and Digital Multimedia

Assuming the 90 days trading horizon Pan Entertainment Co is expected to generate 0.54 times more return on investment than Digital Multimedia. However, Pan Entertainment Co is 1.85 times less risky than Digital Multimedia. It trades about 0.09 of its potential returns per unit of risk. Digital Multimedia Technology is currently generating about -0.2 per unit of risk. If you would invest  208,000  in Pan Entertainment Co on September 3, 2024 and sell it today you would earn a total of  16,000  from holding Pan Entertainment Co or generate 7.69% return on investment over 90 days.

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

Pan Entertainment Co  vs.  Digital Multimedia Technology

Pan Entertainment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pan Entertainment Co are ranked lower than 7 (%) 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 January 2025.

Digital Multimedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digital Multimedia 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Pan Entertainment and Digital Multimedia

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

The idea behind Pan Entertainment Co and Digital Multimedia 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.