Correlation Between ChengDu Hi and Andon Health

Can any of the company-specific risk be diversified away by investing in both ChengDu Hi and Andon Health 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 Hi and Andon Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ChengDu Hi Tech Development and Andon Health Co, you can compare the effects of market volatilities on ChengDu Hi and Andon Health 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 Hi with a short position of Andon Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of ChengDu Hi and Andon Health.

Diversification Opportunities for ChengDu Hi and Andon Health

0.59

Correlation Coefficient

ChengDu Hi  Andon Health

Very weak diversification

The 3 months correlation between ChengDu and Andon is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding ChengDu Hi Tech Development and Andon Health Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Andon Health and ChengDu Hi 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 Hi Tech Development are associated (or correlated) with Andon Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Andon Health has no effect on the direction of ChengDu Hi i.e., ChengDu Hi and Andon Health go up and down completely randomly.

Pair Corralation between ChengDu Hi and Andon Health

Assuming the 90 days trading horizon ChengDu Hi Tech Development is expected to under-perform the Andon Health. In addition to that, ChengDu Hi is 2.07 times more volatile than Andon Health Co. It trades about -0.05 of its total potential returns per unit of risk. Andon Health Co is currently generating about -0.05 per unit of volatility. If you would invest  4,360  in Andon Health Co on December 2, 2024 and sell it today you would lose (213.00) from holding Andon Health Co or give up 4.89% of portfolio value over 90 days.

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

ChengDu Hi Tech Development  vs.  Andon Health Co

ChengDu Hi Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days ChengDu Hi Tech Development 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.

Andon Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Andon Health Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Andon Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ChengDu Hi and Andon Health

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

The idea behind ChengDu Hi Tech Development and Andon Health Co 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.