Correlation Between Genesis Technology and Digital China

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

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

Diversification Opportunities for Genesis Technology and Digital China

0.04

Correlation Coefficient

Genesis Technology  Digital China

Significant diversification

The 3 months correlation between Genesis and Digital is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Genesis Technology and Digital China Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital China Holdings and Genesis Technology 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 Genesis Technology 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 Holdings has no effect on the direction of Genesis Technology i.e., Genesis Technology and Digital China go up and down completely randomly.

Pair Corralation between Genesis Technology and Digital China

Assuming the 90 days trading horizon Genesis Technology is expected to generate 1.06 times more return on investment than Digital China. However, Genesis Technology is 1.06 times more volatile than Digital China Holdings. It trades about 0.13 of its potential returns per unit of risk. Digital China Holdings is currently generating about -0.04 per unit of risk. If you would invest  6,360  in Genesis Technology on December 2, 2024 and sell it today you would earn a total of  1,240  from holding Genesis Technology or generate 19.5% return on investment over 90 days.

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

Genesis Technology  vs.  Digital China Holdings

Genesis Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Genesis Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Genesis Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Digital China Holdings

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Genesis Technology and Digital China

The main advantage of trading using opposite Genesis Technology and Digital China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genesis Technology 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 Genesis Technology and Digital China Holdings 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.