Correlation Between Hengkang Medical and Shenzhen Coship

Can any of the company-specific risk be diversified away by investing in both Hengkang Medical and Shenzhen Coship 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 Shenzhen Coship 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 Shenzhen Coship Electronics, you can compare the effects of market volatilities on Hengkang Medical and Shenzhen Coship 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 Shenzhen Coship. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hengkang Medical and Shenzhen Coship.

Diversification Opportunities for Hengkang Medical and Shenzhen Coship

0.26

Correlation Coefficient

Hengkang Medical  Shenzhen Coship

Modest diversification

The 3 months correlation between Hengkang and Shenzhen is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Hengkang Medical Group and Shenzhen Coship Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Coship Elec 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 Shenzhen Coship. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Coship Elec has no effect on the direction of Hengkang Medical i.e., Hengkang Medical and Shenzhen Coship go up and down completely randomly.

Pair Corralation between Hengkang Medical and Shenzhen Coship

Assuming the 90 days trading horizon Hengkang Medical is expected to generate 14.7 times less return on investment than Shenzhen Coship. But when comparing it to its historical volatility, Hengkang Medical Group is 1.01 times less risky than Shenzhen Coship. It trades about 0.02 of its potential returns per unit of risk. Shenzhen Coship Electronics is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  343.00  in Shenzhen Coship Electronics on October 23, 2024 and sell it today you would earn a total of  302.00  from holding Shenzhen Coship Electronics or generate 88.05% 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.  Shenzhen Coship Electronics

Hengkang Medical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hengkang Medical Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Shenzhen Coship Elec

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Coship Electronics are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Coship sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hengkang Medical and Shenzhen Coship

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

The idea behind Hengkang Medical Group and Shenzhen Coship 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.