Correlation Between Digital China and Sentronic International
Can any of the company-specific risk be diversified away by investing in both Digital China and Sentronic International 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 Sentronic International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Digital China Holdings and Sentronic International, you can compare the effects of market volatilities on Digital China and Sentronic International 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 Sentronic International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital China and Sentronic International.
Diversification Opportunities for Digital China and Sentronic International
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Digital and Sentronic is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Digital China Holdings and Sentronic International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sentronic International 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 Holdings are associated (or correlated) with Sentronic International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sentronic International has no effect on the direction of Digital China i.e., Digital China and Sentronic International go up and down completely randomly.
Pair Corralation between Digital China and Sentronic International
Assuming the 90 days trading horizon Digital China Holdings is expected to generate 1.27 times more return on investment than Sentronic International. However, Digital China is 1.27 times more volatile than Sentronic International. It trades about 0.07 of its potential returns per unit of risk. Sentronic International is currently generating about -0.09 per unit of risk. If you would invest 653.00 in Digital China Holdings on September 24, 2024 and sell it today you would earn a total of 70.00 from holding Digital China Holdings or generate 10.72% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 98.46% |
Values | Daily Returns |
Digital China Holdings vs. Sentronic International
Performance |
Timeline |
Digital China Holdings |
Sentronic International |
Digital China and Sentronic International Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Digital China and Sentronic International
The main advantage of trading using opposite Digital China and Sentronic International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital China position performs unexpectedly, Sentronic International 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 Sentronic International will offset losses from the drop in Sentronic International's long position.Digital China vs. Acer E Enabling Service | Digital China vs. Sysage Technology Co | Digital China vs. Wistron Information Technology | Digital China vs. Genesis Technology |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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