Correlation Between Dezhan HealthCare and China Life

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

Diversification Opportunities for Dezhan HealthCare and China Life

0.01

Correlation Coefficient

Dezhan HealthCare  China Life

Significant diversification

The 3 months correlation between Dezhan and China is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Dezhan HealthCare Co and China Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Life Insurance 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 China Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Life Insurance has no effect on the direction of Dezhan HealthCare i.e., Dezhan HealthCare and China Life go up and down completely randomly.

Pair Corralation between Dezhan HealthCare and China Life

Assuming the 90 days trading horizon Dezhan HealthCare is expected to generate 3.58 times less return on investment than China Life. In addition to that, Dezhan HealthCare is 1.38 times more volatile than China Life Insurance. It trades about 0.0 of its total potential returns per unit of risk. China Life Insurance is currently generating about 0.02 per unit of volatility. If you would invest  3,750  in China Life Insurance on October 4, 2024 and sell it today you would earn a total of  442.00  from holding China Life Insurance or generate 11.79% return on investment over 90 days.

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

Dezhan HealthCare Co  vs.  China Life Insurance

Dezhan HealthCare

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dezhan HealthCare Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dezhan HealthCare is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Life Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Dezhan HealthCare and China Life

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

The idea behind Dezhan HealthCare Co and China Life Insurance 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.