Correlation Between Digital China and Genesis Technology

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Can any of the company-specific risk be diversified away by investing in both Digital China and Genesis Technology 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 Genesis Technology 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 Genesis Technology, you can compare the effects of market volatilities on Digital China and Genesis Technology 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 Genesis Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital China and Genesis Technology.

Diversification Opportunities for Digital China and Genesis Technology

DigitalGenesisDiversified AwayDigitalGenesisDiversified Away100%
-0.06
  Correlation Coefficient

Good diversification

The 3 months correlation between Digital and Genesis is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Digital China Holdings and Genesis Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genesis Technology 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 Genesis Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genesis Technology has no effect on the direction of Digital China i.e., Digital China and Genesis Technology go up and down completely randomly.

Pair Corralation between Digital China and Genesis Technology

Assuming the 90 days trading horizon Digital China is expected to generate 3.48 times less return on investment than Genesis Technology. In addition to that, Digital China is 1.1 times more volatile than Genesis Technology. It trades about 0.05 of its total potential returns per unit of risk. Genesis Technology is currently generating about 0.19 per unit of volatility. If you would invest  6,570  in Genesis Technology on November 19, 2024 and sell it today you would earn a total of  1,890  from holding Genesis Technology or generate 28.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Digital China Holdings  vs.  Genesis Technology

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 0102030
JavaScript chart by amCharts 3.21.15910861 6221
       Timeline  
Digital China Holdings 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Digital China Holdings are ranked lower than 3 (%) 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 March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb66.577.5
Genesis Technology 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Genesis Technology are ranked lower than 15 (%) 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.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb6570758085

Digital China and Genesis Technology Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-8.95-6.7-4.45-2.210.04022.414.837.249.65 0.010.020.030.040.050.060.07
JavaScript chart by amCharts 3.21.15910861 6221
       Returns  

Pair Trading with Digital China and Genesis Technology

The main advantage of trading using opposite Digital China and Genesis Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital China position performs unexpectedly, Genesis Technology 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 Genesis Technology will offset losses from the drop in Genesis Technology's long position.
The idea behind Digital China Holdings and Genesis Technology 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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