Correlation Between China State and Digital China
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By analyzing existing cross correlation between China State Construction and Digital China Information, you can compare the effects of market volatilities on China State 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 China State with a short position of Digital China. Check out your portfolio center. Please also check ongoing floating volatility patterns of China State and Digital China.
Diversification Opportunities for China State and Digital China
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between China and Digital is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding China State Construction 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 China State 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 China State Construction 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 China State i.e., China State and Digital China go up and down completely randomly.
Pair Corralation between China State and Digital China
Assuming the 90 days trading horizon China State is expected to generate 1.02 times less return on investment than Digital China. But when comparing it to its historical volatility, China State Construction is 1.47 times less risky than Digital China. It trades about 0.04 of its potential returns per unit of risk. Digital China Information is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,175 in Digital China Information on September 3, 2024 and sell it today you would earn a total of 50.00 from holding Digital China Information or generate 4.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
China State Construction vs. Digital China Information
Performance |
| Timeline |
| China State Construction |
| Digital China Information |
China State and Digital China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China State and Digital China
The main advantage of trading using opposite China State and Digital China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China State 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.| China State vs. Citic Guoan Wine | China State vs. Shanghai Yanpu Metal | China State vs. Tongyu Communication | China State vs. Guangxi Wuzhou Communications |
| Digital China vs. Fujian Rongji Software | Digital China vs. Dongguan Aohai Technology | Digital China vs. Hangzhou Pinming Software | Digital China vs. Vontron Technology Co |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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