Correlation Between Dezhan HealthCare and Chengdu Spaceon

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

Diversification Opportunities for Dezhan HealthCare and Chengdu Spaceon

0.69

Correlation Coefficient

Dezhan HealthCare  Chengdu Spaceon

Poor diversification

The 3 months correlation between Dezhan and Chengdu is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Dezhan HealthCare Co and Chengdu Spaceon Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chengdu Spaceon Elec 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 Chengdu Spaceon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chengdu Spaceon Elec has no effect on the direction of Dezhan HealthCare i.e., Dezhan HealthCare and Chengdu Spaceon go up and down completely randomly.

Pair Corralation between Dezhan HealthCare and Chengdu Spaceon

Assuming the 90 days trading horizon Dezhan HealthCare Co is expected to generate 1.16 times more return on investment than Chengdu Spaceon. However, Dezhan HealthCare is 1.16 times more volatile than Chengdu Spaceon Electronics. It trades about 0.12 of its potential returns per unit of risk. Chengdu Spaceon Electronics is currently generating about 0.11 per unit of risk. If you would invest  214.00  in Dezhan HealthCare Co on September 25, 2024 and sell it today you would earn a total of  128.00  from holding Dezhan HealthCare Co or generate 59.81% return on investment over 90 days.

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

Dezhan HealthCare Co  vs.  Chengdu Spaceon Electronics

Dezhan HealthCare

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dezhan HealthCare Co are ranked lower than 9 (%) 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.

Chengdu Spaceon Elec

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chengdu Spaceon Electronics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chengdu Spaceon sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dezhan HealthCare and Chengdu Spaceon

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

The idea behind Dezhan HealthCare Co and Chengdu Spaceon Electronics 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.