Correlation Between Digital World and China Health
Can any of the company-specific risk be diversified away by investing in both Digital World and China Health 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 World and China Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Digital World Acquisition and China Health Management, you can compare the effects of market volatilities on Digital World and China Health 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 World with a short position of China Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital World and China Health.
Diversification Opportunities for Digital World and China Health
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Digital and China is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Digital World Acquisition and China Health Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Health Management and Digital World 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 World Acquisition are associated (or correlated) with China Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Health Management has no effect on the direction of Digital World i.e., Digital World and China Health go up and down completely randomly.
Pair Corralation between Digital World and China Health
If you would invest 0.34 in China Health Management on September 4, 2024 and sell it today you would earn a total of 0.06 from holding China Health Management or generate 17.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 0.41% |
| Values | Daily Returns |
Digital World Acquisition vs. China Health Management
Performance |
| Timeline |
| Digital World Acquisition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| China Health Management |
Digital World and China Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital World and China Health
The main advantage of trading using opposite Digital World and China Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital World position performs unexpectedly, China Health 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 China Health will offset losses from the drop in China Health's long position.The idea behind Digital World Acquisition and China Health Management 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.| China Health vs. Absolute Health and | China Health vs. Embrace Change Acquisition | China Health vs. Supurva Healthcare Group | China Health vs. TransAKT |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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