Correlation Between Chengdu Xingrong and Eyebright Medical

Can any of the company-specific risk be diversified away by investing in both Chengdu Xingrong and Eyebright Medical 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 Chengdu Xingrong and Eyebright Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chengdu Xingrong Investment and Eyebright Medical Technology, you can compare the effects of market volatilities on Chengdu Xingrong and Eyebright Medical 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 Chengdu Xingrong with a short position of Eyebright Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chengdu Xingrong and Eyebright Medical.

Diversification Opportunities for Chengdu Xingrong and Eyebright Medical

0.76

Correlation Coefficient

Chengdu Xingrong  Eyebright Medical

Poor diversification

The 3 months correlation between Chengdu and Eyebright is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Chengdu Xingrong Investment and Eyebright Medical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eyebright Medical and Chengdu Xingrong 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 Chengdu Xingrong Investment are associated (or correlated) with Eyebright Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eyebright Medical has no effect on the direction of Chengdu Xingrong i.e., Chengdu Xingrong and Eyebright Medical go up and down completely randomly.

Pair Corralation between Chengdu Xingrong and Eyebright Medical

Assuming the 90 days trading horizon Chengdu Xingrong Investment is expected to generate 0.6 times more return on investment than Eyebright Medical. However, Chengdu Xingrong Investment is 1.67 times less risky than Eyebright Medical. It trades about 0.04 of its potential returns per unit of risk. Eyebright Medical Technology is currently generating about -0.03 per unit of risk. If you would invest  726.00  in Chengdu Xingrong Investment on September 28, 2024 and sell it today you would earn a total of  23.00  from holding Chengdu Xingrong Investment or generate 3.17% return on investment over 90 days.

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

Chengdu Xingrong Investment  vs.  Eyebright Medical Technology

Chengdu Xingrong Inv

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chengdu Xingrong Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Chengdu Xingrong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eyebright Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eyebright Medical Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Chengdu Xingrong and Eyebright Medical

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

The idea behind Chengdu Xingrong Investment and Eyebright Medical Technology 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.