Correlation Between China Merchants and Medprin Regenerative

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

By analyzing existing cross correlation between China Merchants Shekou and Medprin Regenerative Medical, you can compare the effects of market volatilities on China Merchants and Medprin Regenerative 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 China Merchants with a short position of Medprin Regenerative. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and Medprin Regenerative.

Diversification Opportunities for China Merchants and Medprin Regenerative

0.86

Correlation Coefficient

China Merchants  Medprin Regenerative

Very poor diversification

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

Pair Corralation between China Merchants and Medprin Regenerative

Assuming the 90 days trading horizon China Merchants Shekou is expected to under-perform the Medprin Regenerative. But the stock apears to be less risky and, when comparing its historical volatility, China Merchants Shekou is 1.13 times less risky than Medprin Regenerative. The stock trades about -0.08 of its potential returns per unit of risk. The Medprin Regenerative Medical is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  4,722  in Medprin Regenerative Medical on October 27, 2024 and sell it today you would lose (223.00) from holding Medprin Regenerative Medical or give up 4.72% of portfolio value over 90 days.

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

China Merchants Shekou  vs.  Medprin Regenerative Medical

China Merchants Shekou

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Merchants Shekou 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.

Medprin Regenerative

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with China Merchants and Medprin Regenerative

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

The idea behind China Merchants Shekou and Medprin Regenerative Medical 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.