Correlation Between Dezhan HealthCare and Sportsoul

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

By analyzing existing cross correlation between Dezhan HealthCare Co and Sportsoul Co Ltd, you can compare the effects of market volatilities on Dezhan HealthCare and Sportsoul 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 Dezhan HealthCare with a short position of Sportsoul. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dezhan HealthCare and Sportsoul.

Diversification Opportunities for Dezhan HealthCare and Sportsoul

0.81

Correlation Coefficient

Dezhan HealthCare  Sportsoul

Very poor diversification

The 3 months correlation between Dezhan and Sportsoul is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Dezhan HealthCare Co and Sportsoul Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sportsoul and Dezhan HealthCare 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 Dezhan HealthCare Co are associated (or correlated) with Sportsoul. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sportsoul has no effect on the direction of Dezhan HealthCare i.e., Dezhan HealthCare and Sportsoul go up and down completely randomly.

Pair Corralation between Dezhan HealthCare and Sportsoul

Assuming the 90 days trading horizon Dezhan HealthCare Co is expected to generate 1.46 times more return on investment than Sportsoul. However, Dezhan HealthCare is 1.46 times more volatile than Sportsoul Co Ltd. It trades about 0.3 of its potential returns per unit of risk. Sportsoul Co Ltd is currently generating about 0.32 per unit of risk. If you would invest  286.00  in Dezhan HealthCare Co on September 19, 2024 and sell it today you would earn a total of  128.00  from holding Dezhan HealthCare Co or generate 44.76% return on investment over 90 days.

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

Dezhan HealthCare Co  vs.  Sportsoul Co Ltd

Dezhan HealthCare

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dezhan HealthCare Co are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dezhan HealthCare sustained solid returns over the last few months and may actually be approaching a breakup point.

Sportsoul

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sportsoul Co Ltd are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sportsoul sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dezhan HealthCare and Sportsoul

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

The idea behind Dezhan HealthCare Co and Sportsoul Co Ltd 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.