Correlation Between COL Digital and Shenzhen SDG

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

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

Diversification Opportunities for COL Digital and Shenzhen SDG

0.61

Correlation Coefficient

COL Digital  Shenzhen SDG

Poor diversification

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

Pair Corralation between COL Digital and Shenzhen SDG

Assuming the 90 days trading horizon COL Digital Publishing is expected to generate 1.53 times more return on investment than Shenzhen SDG. However, COL Digital is 1.53 times more volatile than Shenzhen SDG Information. It trades about 0.05 of its potential returns per unit of risk. Shenzhen SDG Information is currently generating about -0.02 per unit of risk. If you would invest  1,463  in COL Digital Publishing on October 5, 2024 and sell it today you would earn a total of  750.00  from holding COL Digital Publishing or generate 51.26% return on investment over 90 days.

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

COL Digital Publishing  vs.  Shenzhen SDG Information

COL Digital Publishing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COL Digital Publishing 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.

Shenzhen SDG Information

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with COL Digital and Shenzhen SDG

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

The idea behind COL Digital Publishing and Shenzhen SDG 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..