Correlation Between Digital Multimedia and Hana Financial

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

Diversification Opportunities for Digital Multimedia and Hana Financial

0.61

Correlation Coefficient

Digital Multimedia  Hana Financial

Poor diversification

The 3 months correlation between Digital and Hana is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Digital Multimedia Technology and Hana Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hana Financial 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 Hana Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hana Financial has no effect on the direction of Digital Multimedia i.e., Digital Multimedia and Hana Financial go up and down completely randomly.

Pair Corralation between Digital Multimedia and Hana Financial

Assuming the 90 days trading horizon Digital Multimedia Technology is expected to under-perform the Hana Financial. In addition to that, Digital Multimedia is 1.43 times more volatile than Hana Financial. It trades about -0.08 of its total potential returns per unit of risk. Hana Financial is currently generating about -0.01 per unit of volatility. If you would invest  6,234,784  in Hana Financial on October 9, 2024 and sell it today you would lose (454,784) from holding Hana Financial or give up 7.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.77%
Values	Daily Returns

Digital Multimedia Technology  vs.  Hana Financial

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.

Hana Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hana Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hana Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Digital Multimedia and Hana Financial

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

The idea behind Digital Multimedia Technology and Hana Financial 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.