Correlation Between Tonghua Grape and COL Digital

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

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

Diversification Opportunities for Tonghua Grape and COL Digital

0.42

Correlation Coefficient

Tonghua Grape  COL Digital

Very weak diversification

The 3 months correlation between Tonghua and COL is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Tonghua Grape Wine and COL Digital Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COL Digital Publishing and Tonghua Grape 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 Tonghua Grape Wine are associated (or correlated) with COL Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COL Digital Publishing has no effect on the direction of Tonghua Grape i.e., Tonghua Grape and COL Digital go up and down completely randomly.

Pair Corralation between Tonghua Grape and COL Digital

Assuming the 90 days trading horizon Tonghua Grape Wine is expected to generate 0.91 times more return on investment than COL Digital. However, Tonghua Grape Wine is 1.1 times less risky than COL Digital. It trades about -0.3 of its potential returns per unit of risk. COL Digital Publishing is currently generating about -0.42 per unit of risk. If you would invest  307.00  in Tonghua Grape Wine on October 15, 2024 and sell it today you would lose (50.00) from holding Tonghua Grape Wine or give up 16.29% of portfolio value over 90 days.

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

Tonghua Grape Wine  vs.  COL Digital Publishing

Tonghua Grape Wine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tonghua Grape Wine has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Tonghua Grape is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 somewhat strong basic indicators, COL Digital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tonghua Grape and COL Digital

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

The idea behind Tonghua Grape Wine and COL Digital Publishing 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.