Correlation Between Digital China and Vietnam Manufacturing

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

Diversification Opportunities for Digital China and Vietnam Manufacturing

0.14

Correlation Coefficient

Digital China  Vietnam Manufacturing

Average diversification

The 3 months correlation between Digital and Vietnam is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Digital China Holdings and Vietnam Manufacturing and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Manufacturing and 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 Vietnam Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Manufacturing and has no effect on the direction of Digital China i.e., Digital China and Vietnam Manufacturing go up and down completely randomly.

Pair Corralation between Digital China and Vietnam Manufacturing

Assuming the 90 days trading horizon Digital China Holdings is expected to under-perform the Vietnam Manufacturing. In addition to that, Digital China is 1.69 times more volatile than Vietnam Manufacturing and. It trades about -0.06 of its total potential returns per unit of risk. Vietnam Manufacturing and is currently generating about -0.05 per unit of volatility. If you would invest  700.00  in Vietnam Manufacturing and on December 3, 2024 and sell it today you would lose (30.00) from holding Vietnam Manufacturing and or give up 4.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.25%
Values	Daily Returns

Digital China Holdings  vs.  Vietnam Manufacturing and

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 latest abnormal performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Vietnam Manufacturing and

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vietnam Manufacturing and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Vietnam Manufacturing is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Digital China and Vietnam Manufacturing

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

The idea behind Digital China Holdings and Vietnam Manufacturing and 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.