Correlation Between Digital Imaging and PLAYWITH

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

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

Diversification Opportunities for Digital Imaging and PLAYWITH

0.2

Correlation Coefficient

Digital Imaging  PLAYWITH

Modest diversification

The 3 months correlation between Digital and PLAYWITH is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Digital Imaging Technology and PLAYWITH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLAYWITH and Digital Imaging 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 Imaging Technology are associated (or correlated) with PLAYWITH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLAYWITH has no effect on the direction of Digital Imaging i.e., Digital Imaging and PLAYWITH go up and down completely randomly.

Pair Corralation between Digital Imaging and PLAYWITH

Assuming the 90 days trading horizon Digital Imaging Technology is expected to generate 1.65 times more return on investment than PLAYWITH. However, Digital Imaging is 1.65 times more volatile than PLAYWITH. It trades about 0.11 of its potential returns per unit of risk. PLAYWITH is currently generating about -0.13 per unit of risk. If you would invest  1,348,000  in Digital Imaging Technology on October 22, 2024 and sell it today you would earn a total of  313,000  from holding Digital Imaging Technology or generate 23.22% return on investment over 90 days.

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

Digital Imaging Technology  vs.  PLAYWITH

Digital Imaging Tech

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Imaging Technology are ranked lower than 8 (%) 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.

PLAYWITH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PLAYWITH 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.

Pair Trading with Digital Imaging and PLAYWITH

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

The idea behind Digital Imaging Technology and PLAYWITH 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.