Correlation Between Hengkang Medical and Elite Color

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

Diversification Opportunities for Hengkang Medical and Elite Color

0.6

Correlation Coefficient

Hengkang Medical  Elite Color

Poor diversification

The 3 months correlation between Hengkang and Elite is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Hengkang Medical Group and Elite Color Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elite Color Environmental 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 Elite Color. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elite Color Environmental has no effect on the direction of Hengkang Medical i.e., Hengkang Medical and Elite Color go up and down completely randomly.

Pair Corralation between Hengkang Medical and Elite Color

Assuming the 90 days trading horizon Hengkang Medical Group is expected to under-perform the Elite Color. In addition to that, Hengkang Medical is 1.67 times more volatile than Elite Color Environmental. It trades about -0.12 of its total potential returns per unit of risk. Elite Color Environmental is currently generating about -0.07 per unit of volatility. If you would invest  645.00  in Elite Color Environmental on October 21, 2024 and sell it today you would lose (28.00) from holding Elite Color Environmental or give up 4.34% of portfolio value over 90 days.

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

Hengkang Medical Group  vs.  Elite Color Environmental

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.

Elite Color Environmental

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Elite Color Environmental are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Elite Color may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hengkang Medical and Elite Color

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

The idea behind Hengkang Medical Group and Elite Color Environmental 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.