Correlation Between Innovative Medical and Fuzhou Rockchip

Can any of the company-specific risk be diversified away by investing in both Innovative Medical and Fuzhou Rockchip 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 Innovative Medical and Fuzhou Rockchip into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Innovative Medical Management and Fuzhou Rockchip Electronics, you can compare the effects of market volatilities on Innovative Medical and Fuzhou Rockchip 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 Innovative Medical with a short position of Fuzhou Rockchip. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovative Medical and Fuzhou Rockchip.

Diversification Opportunities for Innovative Medical and Fuzhou Rockchip

0.84

Correlation Coefficient

Innovative Medical  Fuzhou Rockchip

Very poor diversification

The 3 months correlation between Innovative and Fuzhou is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Innovative Medical Management and Fuzhou Rockchip Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuzhou Rockchip Elec and Innovative Medical 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 Innovative Medical Management are associated (or correlated) with Fuzhou Rockchip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuzhou Rockchip Elec has no effect on the direction of Innovative Medical i.e., Innovative Medical and Fuzhou Rockchip go up and down completely randomly.

Pair Corralation between Innovative Medical and Fuzhou Rockchip

Assuming the 90 days trading horizon Innovative Medical Management is expected to under-perform the Fuzhou Rockchip. In addition to that, Innovative Medical is 1.72 times more volatile than Fuzhou Rockchip Electronics. It trades about -0.03 of its total potential returns per unit of risk. Fuzhou Rockchip Electronics is currently generating about -0.04 per unit of volatility. If you would invest  8,611  in Fuzhou Rockchip Electronics on September 5, 2024 and sell it today you would lose (244.00) from holding Fuzhou Rockchip Electronics or give up 2.83% of portfolio value over 90 days.

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

Innovative Medical Management  vs.  Fuzhou Rockchip Electronics

Innovative Medical

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Innovative Medical Management are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Innovative Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Fuzhou Rockchip Elec

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fuzhou Rockchip Electronics are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fuzhou Rockchip sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Innovative Medical and Fuzhou Rockchip

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

The idea behind Innovative Medical Management and Fuzhou Rockchip 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.