Correlation Between APT Medical and Digital China

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

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

Diversification Opportunities for APT Medical and Digital China

0.32

Correlation Coefficient

APT Medical  Digital China

Weak diversification

The 3 months correlation between APT and Digital is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding APT Medical 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 APT Medical 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 APT Medical 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 APT Medical i.e., APT Medical and Digital China go up and down completely randomly.

Pair Corralation between APT Medical and Digital China

Assuming the 90 days trading horizon APT Medical is expected to under-perform the Digital China. But the stock apears to be less risky and, when comparing its historical volatility, APT Medical is 1.77 times less risky than Digital China. The stock trades about -0.01 of its potential returns per unit of risk. The Digital China Information is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,215  in Digital China Information on November 29, 2024 and sell it today you would earn a total of  112.00  from holding Digital China Information or generate 9.22% return on investment over 90 days.

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

APT Medical  vs.  Digital China Information

APT Medical

Risk-Adjusted Performance

Very Weak

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

Digital China Information

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Digital China Information are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Digital China sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with APT Medical and Digital China

The main advantage of trading using opposite APT Medical and Digital China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APT Medical 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 APT Medical 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.