Correlation Between Digiwin Software and China Life

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

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

Diversification Opportunities for Digiwin Software and China Life

-0.19

Correlation Coefficient

Digiwin Software  China Life

Good diversification

The 3 months correlation between Digiwin and China is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Digiwin Software Co and China Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Life Insurance and Digiwin Software 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 Digiwin Software Co are associated (or correlated) with China Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Life Insurance has no effect on the direction of Digiwin Software i.e., Digiwin Software and China Life go up and down completely randomly.

Pair Corralation between Digiwin Software and China Life

Assuming the 90 days trading horizon Digiwin Software Co is expected to generate 3.02 times more return on investment than China Life. However, Digiwin Software is 3.02 times more volatile than China Life Insurance. It trades about 0.11 of its potential returns per unit of risk. China Life Insurance is currently generating about -0.11 per unit of risk. If you would invest  2,691  in Digiwin Software Co on December 25, 2024 and sell it today you would earn a total of  777.00  from holding Digiwin Software Co or generate 28.87% return on investment over 90 days.

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

Digiwin Software Co  vs.  China Life Insurance

Digiwin Software

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digiwin Software Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Digiwin Software sustained solid returns over the last few months and may actually be approaching a breakup point.

China Life Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Life Insurance 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.

Pair Trading with Digiwin Software and China Life

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

The idea behind Digiwin Software Co and China Life Insurance 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.