Correlation Between Syscom Computer and Digital China

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

By analyzing existing cross correlation between Syscom Computer Engineering and Digital China Holdings, you can compare the effects of market volatilities on Syscom Computer 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 Syscom Computer with a short position of Digital China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Syscom Computer and Digital China.

Diversification Opportunities for Syscom Computer and Digital China

-0.7

Correlation Coefficient

Syscom Computer  Digital China

Excellent diversification

The 3 months correlation between Syscom and Digital is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Syscom Computer Engineering 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 Syscom Computer 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 Syscom Computer Engineering 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 Syscom Computer i.e., Syscom Computer and Digital China go up and down completely randomly.

Pair Corralation between Syscom Computer and Digital China

Assuming the 90 days trading horizon Syscom Computer Engineering is expected to under-perform the Digital China. But the stock apears to be less risky and, when comparing its historical volatility, Syscom Computer Engineering is 1.25 times less risky than Digital China. The stock trades about -0.04 of its potential returns per unit of risk. The Digital China Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  661.00  in Digital China Holdings on September 2, 2024 and sell it today you would earn a total of  89.00  from holding Digital China Holdings or generate 13.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Syscom Computer Engineering  vs.  Digital China Holdings

Syscom Computer Engi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Syscom Computer Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Syscom Computer is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Digital China Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Digital China Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Digital China sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Syscom Computer and Digital China

The main advantage of trading using opposite Syscom Computer and Digital China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Syscom Computer 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.

The idea behind Syscom Computer Engineering and Digital China Holdings 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.