Correlation Between Global Develpmts and Digital China
Can any of the company-specific risk be diversified away by investing in both Global Develpmts and Digital China 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 Global Develpmts and Digital China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Develpmts and Digital China Holdings, you can compare the effects of market volatilities on Global Develpmts 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 Global Develpmts with a short position of Digital China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Develpmts and Digital China.
Diversification Opportunities for Global Develpmts and Digital China
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and Digital is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Global Develpmts and Digital China Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital China Holdings and Global Develpmts 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 Global Develpmts 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 Holdings has no effect on the direction of Global Develpmts i.e., Global Develpmts and Digital China go up and down completely randomly.
Pair Corralation between Global Develpmts and Digital China
Given the investment horizon of 90 days Global Develpmts is expected to generate 1.12 times less return on investment than Digital China. In addition to that, Global Develpmts is 2.78 times more volatile than Digital China Holdings. It trades about 0.1 of its total potential returns per unit of risk. Digital China Holdings is currently generating about 0.3 per unit of volatility. If you would invest 154.00 in Digital China Holdings on September 4, 2024 and sell it today you would earn a total of 55.00 from holding Digital China Holdings or generate 35.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Develpmts vs. Digital China Holdings
Performance |
| Timeline |
| Global Develpmts |
| Digital China Holdings |
Global Develpmts and Digital China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Develpmts and Digital China
The main advantage of trading using opposite Global Develpmts and Digital China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Develpmts 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.| Global Develpmts vs. Manaris Corp | Global Develpmts vs. Green Planet Bio | Global Develpmts vs. Continental Beverage Brands | Global Develpmts vs. Opus Magnum Ameris |
| Digital China vs. Global Develpmts | Digital China vs. Parsons Corp | Digital China vs. GBT Technologies | Digital China vs. Appen Limited |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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