Correlation Between ABOV Semiconductor and Digital Multimedia

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

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

Diversification Opportunities for ABOV Semiconductor and Digital Multimedia

0.88

Correlation Coefficient

ABOV Semiconductor  Digital Multimedia

Very poor diversification

The 3 months correlation between ABOV and Digital is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding ABOV Semiconductor 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 ABOV Semiconductor 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 ABOV Semiconductor 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 ABOV Semiconductor i.e., ABOV Semiconductor and Digital Multimedia go up and down completely randomly.

Pair Corralation between ABOV Semiconductor and Digital Multimedia

Assuming the 90 days trading horizon ABOV Semiconductor is expected to generate 1.73 times less return on investment than Digital Multimedia. But when comparing it to its historical volatility, ABOV Semiconductor Co is 1.5 times less risky than Digital Multimedia. It trades about 0.37 of its potential returns per unit of risk. Digital Multimedia Technology is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  149,000  in Digital Multimedia Technology on October 11, 2024 and sell it today you would earn a total of  64,000  from holding Digital Multimedia Technology or generate 42.95% return on investment over 90 days.

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

ABOV Semiconductor Co  vs.  Digital Multimedia Technology

ABOV Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABOV Semiconductor Co 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 somewhat strong basic indicators, Digital Multimedia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ABOV Semiconductor and Digital Multimedia

The main advantage of trading using opposite ABOV Semiconductor and Digital Multimedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABOV Semiconductor 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 ABOV Semiconductor 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.