Correlation Between New Hope and Digital China
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By analyzing existing cross correlation between New Hope Dairy and Digital China Information, you can compare the effects of market volatilities on New Hope 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 New Hope with a short position of Digital China. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Hope and Digital China.
Diversification Opportunities for New Hope and Digital China
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between New and Digital is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding New Hope Dairy 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 New Hope 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 New Hope Dairy 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 New Hope i.e., New Hope and Digital China go up and down completely randomly.
Pair Corralation between New Hope and Digital China
Assuming the 90 days trading horizon New Hope Dairy is expected to under-perform the Digital China. But the stock apears to be less risky and, when comparing its historical volatility, New Hope Dairy is 1.14 times less risky than Digital China. The stock trades about -0.27 of its potential returns per unit of risk. The Digital China Information is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,005 in Digital China Information on November 7, 2024 and sell it today you would earn a total of 86.00 from holding Digital China Information or generate 8.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Hope Dairy vs. Digital China Information
Performance |
| Timeline |
| New Hope Dairy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| Digital China Information |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
New Hope and Digital China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Hope and Digital China
The main advantage of trading using opposite New Hope and Digital China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Hope 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 New Hope Dairy 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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