Correlation Between Digital Multimedia and Histeel

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

Diversification Opportunities for Digital Multimedia and Histeel

0.2

Correlation Coefficient

Digital Multimedia  Histeel

Modest diversification

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

Pair Corralation between Digital Multimedia and Histeel

Assuming the 90 days trading horizon Digital Multimedia is expected to generate 1.3 times less return on investment than Histeel. But when comparing it to its historical volatility, Digital Multimedia Technology is 1.32 times less risky than Histeel. It trades about 0.12 of its potential returns per unit of risk. Histeel is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  273,500  in Histeel on December 30, 2024 and sell it today you would earn a total of  93,000  from holding Histeel or generate 34.0% return on investment over 90 days.

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

Digital Multimedia Technology  vs.  Histeel

Digital Multimedia

Risk-Adjusted Performance

OK

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

Histeel

Risk-Adjusted Performance

OK

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

Pair Trading with Digital Multimedia and Histeel

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

The idea behind Digital Multimedia Technology and Histeel 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.