Correlation Between Tatung System and Digital China

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

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

Diversification Opportunities for Tatung System and Digital China

-0.51

Correlation Coefficient

Tatung System  Digital China

Excellent diversification

The 3 months correlation between Tatung and Digital is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Tatung System Technologies 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 Tatung System 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 Tatung System Technologies 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 Tatung System i.e., Tatung System and Digital China go up and down completely randomly.

Pair Corralation between Tatung System and Digital China

Assuming the 90 days trading horizon Tatung System Technologies is expected to generate 0.92 times more return on investment than Digital China. However, Tatung System Technologies is 1.09 times less risky than Digital China. It trades about 0.09 of its potential returns per unit of risk. Digital China Holdings is currently generating about 0.08 per unit of risk. If you would invest  7,870  in Tatung System Technologies on September 3, 2024 and sell it today you would earn a total of  1,110  from holding Tatung System Technologies or generate 14.1% return on investment over 90 days.

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

Tatung System Technologies  vs.  Digital China Holdings

Tatung System Techno

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tatung System Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Tatung System showed solid returns over the last few months and may actually be approaching a breakup point.

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 Tatung System and Digital China

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

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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.