Correlation Between Dezhan HealthCare and Beijing Kaiwen

Can any of the company-specific risk be diversified away by investing in both Dezhan HealthCare and Beijing Kaiwen 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 Beijing Kaiwen 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 Beijing Kaiwen Education, you can compare the effects of market volatilities on Dezhan HealthCare and Beijing Kaiwen 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 Beijing Kaiwen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dezhan HealthCare and Beijing Kaiwen.

Diversification Opportunities for Dezhan HealthCare and Beijing Kaiwen

0.59

Correlation Coefficient

Dezhan HealthCare  Beijing Kaiwen

Very weak diversification

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

Pair Corralation between Dezhan HealthCare and Beijing Kaiwen

Assuming the 90 days trading horizon Dezhan HealthCare Co is expected to generate 1.08 times more return on investment than Beijing Kaiwen. However, Dezhan HealthCare is 1.08 times more volatile than Beijing Kaiwen Education. It trades about 0.06 of its potential returns per unit of risk. Beijing Kaiwen Education is currently generating about 0.0 per unit of risk. If you would invest  280.00  in Dezhan HealthCare Co on October 12, 2024 and sell it today you would earn a total of  33.00  from holding Dezhan HealthCare Co or generate 11.79% return on investment over 90 days.

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

Dezhan HealthCare Co  vs.  Beijing Kaiwen Education

Dezhan HealthCare

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dezhan HealthCare Co are ranked lower than 4 (%) 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.

Beijing Kaiwen Education

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Dezhan HealthCare and Beijing Kaiwen

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

The idea behind Dezhan HealthCare Co and Beijing Kaiwen Education 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.