Correlation Between Digital China and Zhuhai Comleader

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

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

Diversification Opportunities for Digital China and Zhuhai Comleader

0.87

Correlation Coefficient

Digital China  Zhuhai Comleader

Very poor diversification

The 3 months correlation between Digital and Zhuhai is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Digital China Information and Zhuhai Comleader Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhuhai Comleader Inf and Digital China 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 China Information are associated (or correlated) with Zhuhai Comleader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhuhai Comleader Inf has no effect on the direction of Digital China i.e., Digital China and Zhuhai Comleader go up and down completely randomly.

Pair Corralation between Digital China and Zhuhai Comleader

Assuming the 90 days trading horizon Digital China Information is expected to generate 0.93 times more return on investment than Zhuhai Comleader. However, Digital China Information is 1.07 times less risky than Zhuhai Comleader. It trades about 0.07 of its potential returns per unit of risk. Zhuhai Comleader Information is currently generating about 0.06 per unit of risk. If you would invest  940.00  in Digital China Information on September 29, 2024 and sell it today you would earn a total of  255.00  from holding Digital China Information or generate 27.13% return on investment over 90 days.

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

Digital China Information  vs.  Zhuhai Comleader Information

Digital China Information

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Digital China Information are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Digital China may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Zhuhai Comleader Inf

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhuhai Comleader Information are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhuhai Comleader sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Digital China and Zhuhai Comleader

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

The idea behind Digital China Information and Zhuhai Comleader Information 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.