Correlation Between Zhongshan Public and Humanwell Healthcare

Can any of the company-specific risk be diversified away by investing in both Zhongshan Public and Humanwell Healthcare 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 Zhongshan Public and Humanwell Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhongshan Public Utilities and Humanwell Healthcare Group, you can compare the effects of market volatilities on Zhongshan Public and Humanwell Healthcare 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 Zhongshan Public with a short position of Humanwell Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhongshan Public and Humanwell Healthcare.

Diversification Opportunities for Zhongshan Public and Humanwell Healthcare

0.64

Correlation Coefficient

Zhongshan Public  Humanwell Healthcare

Poor diversification

The 3 months correlation between Zhongshan and Humanwell is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Zhongshan Public Utilities and Humanwell Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humanwell Healthcare and Zhongshan Public 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 Zhongshan Public Utilities are associated (or correlated) with Humanwell Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Humanwell Healthcare has no effect on the direction of Zhongshan Public i.e., Zhongshan Public and Humanwell Healthcare go up and down completely randomly.

Pair Corralation between Zhongshan Public and Humanwell Healthcare

Assuming the 90 days trading horizon Zhongshan Public is expected to generate 1.5 times less return on investment than Humanwell Healthcare. But when comparing it to its historical volatility, Zhongshan Public Utilities is 1.4 times less risky than Humanwell Healthcare. It trades about 0.04 of its potential returns per unit of risk. Humanwell Healthcare Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,155  in Humanwell Healthcare Group on October 25, 2024 and sell it today you would earn a total of  92.00  from holding Humanwell Healthcare Group or generate 4.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Zhongshan Public Utilities  vs.  Humanwell Healthcare Group

Zhongshan Public Uti

Risk-Adjusted Performance

2 of 100

Weak

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

Humanwell Healthcare

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Humanwell Healthcare Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Humanwell Healthcare is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Zhongshan Public and Humanwell Healthcare

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

The idea behind Zhongshan Public Utilities and Humanwell Healthcare Group 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.