Correlation Between Digital Multimedia and Kumho Ind

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

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

Diversification Opportunities for Digital Multimedia and Kumho Ind

0.79

Correlation Coefficient

Digital Multimedia  Kumho Ind

Poor diversification

The 3 months correlation between Digital and Kumho is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Digital Multimedia Technology and Kumho Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kumho Ind and Digital Multimedia 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 Multimedia Technology are associated (or correlated) with Kumho Ind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kumho Ind has no effect on the direction of Digital Multimedia i.e., Digital Multimedia and Kumho Ind go up and down completely randomly.

Pair Corralation between Digital Multimedia and Kumho Ind

Assuming the 90 days trading horizon Digital Multimedia Technology is expected to generate 1.88 times more return on investment than Kumho Ind. However, Digital Multimedia is 1.88 times more volatile than Kumho Ind. It trades about 0.43 of its potential returns per unit of risk. Kumho Ind is currently generating about 0.19 per unit of risk. If you would invest  144,000  in Digital Multimedia Technology on October 9, 2024 and sell it today you would earn a total of  58,500  from holding Digital Multimedia Technology or generate 40.63% return on investment over 90 days.

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

Digital Multimedia Technology  vs.  Kumho Ind

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Kumho Ind

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kumho Ind 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 Multimedia and Kumho Ind

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

The idea behind Digital Multimedia Technology and Kumho Ind 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.