Correlation Between Digital China and Fuzhou Rockchip

Can any of the company-specific risk be diversified away by investing in both Digital China and Fuzhou Rockchip 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 Fuzhou Rockchip into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Digital China Information and Fuzhou Rockchip Electronics, you can compare the effects of market volatilities on Digital China and Fuzhou Rockchip 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 Fuzhou Rockchip. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital China and Fuzhou Rockchip.

Diversification Opportunities for Digital China and Fuzhou Rockchip

0.93

Correlation Coefficient

Digital China  Fuzhou Rockchip

Almost no diversification

The 3 months correlation between Digital and Fuzhou is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Digital China Information and Fuzhou Rockchip Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuzhou Rockchip Elec 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 Information are associated (or correlated) with Fuzhou Rockchip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuzhou Rockchip Elec has no effect on the direction of Digital China i.e., Digital China and Fuzhou Rockchip go up and down completely randomly.

Pair Corralation between Digital China and Fuzhou Rockchip

Assuming the 90 days trading horizon Digital China is expected to generate 1.09 times less return on investment than Fuzhou Rockchip. In addition to that, Digital China is 1.06 times more volatile than Fuzhou Rockchip Electronics. It trades about 0.24 of its total potential returns per unit of risk. Fuzhou Rockchip Electronics is currently generating about 0.28 per unit of volatility. If you would invest  4,990  in Fuzhou Rockchip Electronics on September 14, 2024 and sell it today you would earn a total of  4,200  from holding Fuzhou Rockchip Electronics or generate 84.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Digital China Information  vs.  Fuzhou Rockchip Electronics

Digital China Information

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Digital China Information are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Digital China sustained solid returns over the last few months and may actually be approaching a breakup point.

Fuzhou Rockchip Elec

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fuzhou Rockchip Electronics are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fuzhou Rockchip sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Digital China and Fuzhou Rockchip

The main advantage of trading using opposite Digital China and Fuzhou Rockchip positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital China position performs unexpectedly, Fuzhou Rockchip 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 Fuzhou Rockchip will offset losses from the drop in Fuzhou Rockchip's long position.

The idea behind Digital China Information and Fuzhou Rockchip Electronics 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.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.