Correlation Between Runjian Communication and Digital China

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

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

Diversification Opportunities for Runjian Communication and Digital China

0.37

Correlation Coefficient

Runjian Communication  Digital China

Weak diversification

The 3 months correlation between Runjian and Digital is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Runjian Communication Co and Digital China Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital China Information and Runjian Communication 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 Runjian Communication Co are associated (or correlated) with Digital China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital China Information has no effect on the direction of Runjian Communication i.e., Runjian Communication and Digital China go up and down completely randomly.

Pair Corralation between Runjian Communication and Digital China

Assuming the 90 days trading horizon Runjian Communication Co is expected to generate 0.78 times more return on investment than Digital China. However, Runjian Communication Co is 1.28 times less risky than Digital China. It trades about 0.04 of its potential returns per unit of risk. Digital China Information is currently generating about -0.14 per unit of risk. If you would invest  3,015  in Runjian Communication Co on October 6, 2024 and sell it today you would earn a total of  55.00  from holding Runjian Communication Co or generate 1.82% return on investment over 90 days.

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

Runjian Communication Co  vs.  Digital China Information

Runjian Communication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Runjian Communication Co 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 China Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digital China Information 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 Runjian Communication and Digital China

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

The idea behind Runjian Communication Co and Digital China 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.