Correlation Between Everjoy Health and China Reform

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

By analyzing existing cross correlation between Everjoy Health Group and China Reform Health, you can compare the effects of market volatilities on Everjoy Health and China Reform 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 Everjoy Health with a short position of China Reform. Check out your portfolio center. Please also check ongoing floating volatility patterns of Everjoy Health and China Reform.

Diversification Opportunities for Everjoy Health and China Reform

0.18

Correlation Coefficient

Everjoy Health  China Reform

Average diversification

The 3 months correlation between Everjoy and China is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Everjoy Health Group and China Reform Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Reform Health and Everjoy Health 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 Everjoy Health Group are associated (or correlated) with China Reform. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Reform Health has no effect on the direction of Everjoy Health i.e., Everjoy Health and China Reform go up and down completely randomly.

Pair Corralation between Everjoy Health and China Reform

Assuming the 90 days trading horizon Everjoy Health is expected to generate 1.82 times less return on investment than China Reform. But when comparing it to its historical volatility, Everjoy Health Group is 1.25 times less risky than China Reform. It trades about 0.07 of its potential returns per unit of risk. China Reform Health is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  643.00  in China Reform Health on October 8, 2024 and sell it today you would earn a total of  363.00  from holding China Reform Health or generate 56.45% return on investment over 90 days.

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

Everjoy Health Group  vs.  China Reform Health

Everjoy Health Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Everjoy Health Group 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.

China Reform Health

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Everjoy Health and China Reform

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

The idea behind Everjoy Health Group and China Reform Health 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.