Correlation Between Digital China and Ares International
Can any of the company-specific risk be diversified away by investing in both Digital China and Ares International 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 Ares International 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 Ares International Corp, you can compare the effects of market volatilities on Digital China and Ares International 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 Ares International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital China and Ares International.
Diversification Opportunities for Digital China and Ares International
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Digital and Ares is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Digital China Holdings and Ares International Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares International Corp 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 Ares International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares International Corp has no effect on the direction of Digital China i.e., Digital China and Ares International go up and down completely randomly.
Pair Corralation between Digital China and Ares International
Assuming the 90 days trading horizon Digital China Holdings is expected to generate 2.96 times more return on investment than Ares International. However, Digital China is 2.96 times more volatile than Ares International Corp. It trades about 0.26 of its potential returns per unit of risk. Ares International Corp is currently generating about -0.22 per unit of risk. If you would invest 584.00 in Digital China Holdings on August 24, 2024 and sell it today you would earn a total of 98.00 from holding Digital China Holdings or generate 16.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Digital China Holdings vs. Ares International Corp
Performance |
| Timeline |
| Digital China Holdings |
| Ares International Corp |
Digital China and Ares International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital China and Ares International
The main advantage of trading using opposite Digital China and Ares International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital China position performs unexpectedly, Ares International 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 Ares International will offset losses from the drop in Ares International's long position.| Digital China vs. Acer E Enabling Service | Digital China vs. Sysage Technology Co | Digital China vs. Green World Fintech | Digital China vs. Genesis Technology |
| Ares International vs. Novatek Microelectronics Corp | Ares International vs. MediaTek | Ares International vs. Quanta Computer | Ares International vs. United Microelectronics |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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