Correlation Between Hengkang Medical and Shenzhen Glory

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

Diversification Opportunities for Hengkang Medical and Shenzhen Glory

0.94

Correlation Coefficient

Hengkang Medical  Shenzhen Glory

Almost no diversification

The 3 months correlation between Hengkang and Shenzhen is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Hengkang Medical Group and Shenzhen Glory Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Glory Medical 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 Glory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Glory Medical has no effect on the direction of Hengkang Medical i.e., Hengkang Medical and Shenzhen Glory go up and down completely randomly.

Pair Corralation between Hengkang Medical and Shenzhen Glory

Assuming the 90 days trading horizon Hengkang Medical Group is expected to generate 1.22 times more return on investment than Shenzhen Glory. However, Hengkang Medical is 1.22 times more volatile than Shenzhen Glory Medical. It trades about 0.2 of its potential returns per unit of risk. Shenzhen Glory Medical is currently generating about 0.18 per unit of risk. If you would invest  173.00  in Hengkang Medical Group on September 2, 2024 and sell it today you would earn a total of  97.00  from holding Hengkang Medical Group or generate 56.07% return on investment over 90 days.

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

Hengkang Medical Group  vs.  Shenzhen Glory Medical

Hengkang Medical

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hengkang Medical Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hengkang Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen Glory Medical

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Glory Medical are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Glory sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hengkang Medical and Shenzhen Glory

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

The idea behind Hengkang Medical Group and Shenzhen Glory Medical 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.