Correlation Between Ssangyong Information and Digital Power

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

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

Diversification Opportunities for Ssangyong Information and Digital Power

-0.77

Correlation Coefficient

Ssangyong Information  Digital Power

Pay attention - limited upside

The 1 month correlation between Ssangyong and Digital is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Ssangyong Information Communic and Digital Power Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Power Commun and Ssangyong Information 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 Ssangyong Information Communication are associated (or correlated) with Digital Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Power Commun has no effect on the direction of Ssangyong Information i.e., Ssangyong Information and Digital Power go up and down completely randomly.

Pair Corralation between Ssangyong Information and Digital Power

Assuming the 90 days trading horizon Ssangyong Information Communication is expected to under-perform the Digital Power. But the stock apears to be less risky and, when comparing its historical volatility, Ssangyong Information Communication is 1.1 times less risky than Digital Power. The stock trades about -0.05 of its potential returns per unit of risk. The Digital Power Communications is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  597,676  in Digital Power Communications on February 15, 2024 and sell it today you would earn a total of  358,324  from holding Digital Power Communications or generate 59.95% return on investment over 90 days.

Time Period	1 Month [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Ssangyong Information Communic  vs.  Digital Power Communications

Ssangyong Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ssangyong Information Communication 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.

Digital Power Commun

Risk-Adjusted Performance

37 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Power Communications are ranked lower than 37 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Digital Power sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ssangyong Information and Digital Power

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

The idea behind Ssangyong Information Communication and Digital Power Communications 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.