Correlation Between Digital China and Yung Zip

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

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

Diversification Opportunities for Digital China and Yung Zip

-0.68

Correlation Coefficient

Digital China  Yung Zip

Excellent diversification

The 3 months correlation between Digital and Yung is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Digital China Holdings and Yung Zip Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yung Zip Chemical and Digital China 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 Digital China Holdings are associated (or correlated) with Yung Zip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yung Zip Chemical has no effect on the direction of Digital China i.e., Digital China and Yung Zip go up and down completely randomly.

Pair Corralation between Digital China and Yung Zip

Assuming the 90 days trading horizon Digital China Holdings is expected to generate 1.26 times more return on investment than Yung Zip. However, Digital China is 1.26 times more volatile than Yung Zip Chemical. It trades about -0.02 of its potential returns per unit of risk. Yung Zip Chemical is currently generating about -0.04 per unit of risk. If you would invest  705.00  in Digital China Holdings on October 13, 2024 and sell it today you would lose (55.00) from holding Digital China Holdings or give up 7.8% of portfolio value over 90 days.

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

Digital China Holdings  vs.  Yung Zip Chemical

Digital China Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Digital China Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Digital China may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Yung Zip Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yung Zip Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Digital China and Yung Zip

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

The idea behind Digital China Holdings and Yung Zip Chemical 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.