Correlation Between Hengkang Medical and Renrenle Commercial

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

Diversification Opportunities for Hengkang Medical and Renrenle Commercial

0.69

Correlation Coefficient

Hengkang Medical  Renrenle Commercial

Poor diversification

The 3 months correlation between Hengkang and Renrenle is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Hengkang Medical Group and Renrenle Commercial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renrenle Commercial 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 Renrenle Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renrenle Commercial has no effect on the direction of Hengkang Medical i.e., Hengkang Medical and Renrenle Commercial go up and down completely randomly.

Pair Corralation between Hengkang Medical and Renrenle Commercial

Assuming the 90 days trading horizon Hengkang Medical Group is expected to under-perform the Renrenle Commercial. In addition to that, Hengkang Medical is 1.17 times more volatile than Renrenle Commercial Group. It trades about -0.1 of its total potential returns per unit of risk. Renrenle Commercial Group is currently generating about 0.41 per unit of volatility. If you would invest  479.00  in Renrenle Commercial Group on October 3, 2024 and sell it today you would earn a total of  184.00  from holding Renrenle Commercial Group or generate 38.41% return on investment over 90 days.

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

Hengkang Medical Group  vs.  Renrenle Commercial Group

Hengkang Medical

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hengkang Medical Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hengkang Medical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Renrenle Commercial

Risk-Adjusted Performance

28 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Renrenle Commercial Group are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Renrenle Commercial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hengkang Medical and Renrenle Commercial

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

The idea behind Hengkang Medical Group and Renrenle Commercial Group 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.