Correlation Between Dezhan HealthCare and Shenzhen Bingchuan

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

Diversification Opportunities for Dezhan HealthCare and Shenzhen Bingchuan

0.86

Correlation Coefficient

Dezhan HealthCare  Shenzhen Bingchuan

Very poor diversification

The 3 months correlation between Dezhan and Shenzhen is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Dezhan HealthCare Co and Shenzhen Bingchuan Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Bingchuan 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 Shenzhen Bingchuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Bingchuan has no effect on the direction of Dezhan HealthCare i.e., Dezhan HealthCare and Shenzhen Bingchuan go up and down completely randomly.

Pair Corralation between Dezhan HealthCare and Shenzhen Bingchuan

Assuming the 90 days trading horizon Dezhan HealthCare is expected to generate 1.23 times less return on investment than Shenzhen Bingchuan. But when comparing it to its historical volatility, Dezhan HealthCare Co is 1.19 times less risky than Shenzhen Bingchuan. It trades about 0.25 of its potential returns per unit of risk. Shenzhen Bingchuan Network is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  1,303  in Shenzhen Bingchuan Network on September 14, 2024 and sell it today you would earn a total of  1,242  from holding Shenzhen Bingchuan Network or generate 95.32% 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.  Shenzhen Bingchuan Network

Dezhan HealthCare

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dezhan HealthCare Co are ranked lower than 19 (%) 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.

Shenzhen Bingchuan

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Bingchuan Network are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Bingchuan sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dezhan HealthCare and Shenzhen Bingchuan

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

The idea behind Dezhan HealthCare Co and Shenzhen Bingchuan Network 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.