Correlation Between Hengkang Medical and Cofco Biochemical

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

By analyzing existing cross correlation between Hengkang Medical Group and Cofco Biochemical Anhui, you can compare the effects of market volatilities on Hengkang Medical and Cofco Biochemical 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 Hengkang Medical with a short position of Cofco Biochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hengkang Medical and Cofco Biochemical.

Diversification Opportunities for Hengkang Medical and Cofco Biochemical

0.35

Correlation Coefficient

Hengkang Medical  Cofco Biochemical

Weak diversification

The 3 months correlation between Hengkang and Cofco is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Hengkang Medical Group and Cofco Biochemical Anhui in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cofco Biochemical Anhui and Hengkang 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 Hengkang Medical Group are associated (or correlated) with Cofco Biochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cofco Biochemical Anhui has no effect on the direction of Hengkang Medical i.e., Hengkang Medical and Cofco Biochemical go up and down completely randomly.

Pair Corralation between Hengkang Medical and Cofco Biochemical

Assuming the 90 days trading horizon Hengkang Medical Group is expected to generate 1.76 times more return on investment than Cofco Biochemical. However, Hengkang Medical is 1.76 times more volatile than Cofco Biochemical Anhui. It trades about 0.05 of its potential returns per unit of risk. Cofco Biochemical Anhui is currently generating about -0.01 per unit of risk. If you would invest  208.00  in Hengkang Medical Group on October 13, 2024 and sell it today you would earn a total of  45.00  from holding Hengkang Medical Group or generate 21.63% return on investment over 90 days.

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

Hengkang Medical Group  vs.  Cofco Biochemical Anhui

Hengkang Medical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Cofco Biochemical Anhui

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cofco Biochemical Anhui has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hengkang Medical and Cofco Biochemical

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

The idea behind Hengkang Medical Group and Cofco Biochemical Anhui 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.