Correlation Between Cal Comp and Digital China

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

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

Diversification Opportunities for Cal Comp and Digital China

0.51

Correlation Coefficient

Cal Comp  Digital China

Very weak diversification

The 3 months correlation between Cal and Digital is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Cal Comp Electronics Public 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 Cal Comp 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 Cal Comp Electronics Public 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 Cal Comp i.e., Cal Comp and Digital China go up and down completely randomly.

Pair Corralation between Cal Comp and Digital China

Assuming the 90 days trading horizon Cal Comp Electronics Public is expected to generate 1.08 times more return on investment than Digital China. However, Cal Comp is 1.08 times more volatile than Digital China Holdings. It trades about 0.23 of its potential returns per unit of risk. Digital China Holdings is currently generating about 0.09 per unit of risk. If you would invest  516.00  in Cal Comp Electronics Public on September 14, 2024 and sell it today you would earn a total of  267.00  from holding Cal Comp Electronics Public or generate 51.74% return on investment over 90 days.

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

Cal Comp Electronics Public  vs.  Digital China Holdings

Cal Comp Electronics

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cal Comp Electronics Public are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Cal Comp showed solid returns over the last few months and may actually be approaching a breakup point.

Digital China Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digital China Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Digital China sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cal Comp and Digital China

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

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.