Correlation Between Hengkang Medical and Qingdao Choho

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

Diversification Opportunities for Hengkang Medical and Qingdao Choho

0.87

Correlation Coefficient

Hengkang Medical  Qingdao Choho

Very poor diversification

The 3 months correlation between Hengkang and Qingdao is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Hengkang Medical Group and Qingdao Choho Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qingdao Choho Industrial 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 Qingdao Choho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qingdao Choho Industrial has no effect on the direction of Hengkang Medical i.e., Hengkang Medical and Qingdao Choho go up and down completely randomly.

Pair Corralation between Hengkang Medical and Qingdao Choho

Assuming the 90 days trading horizon Hengkang Medical Group is expected to generate 1.36 times more return on investment than Qingdao Choho. However, Hengkang Medical is 1.36 times more volatile than Qingdao Choho Industrial. It trades about 0.23 of its potential returns per unit of risk. Qingdao Choho Industrial is currently generating about 0.16 per unit of risk. If you would invest  185.00  in Hengkang Medical Group on September 13, 2024 and sell it today you would earn a total of  121.00  from holding Hengkang Medical Group or generate 65.41% return on investment over 90 days.

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

Hengkang Medical Group  vs.  Qingdao Choho Industrial

Hengkang Medical

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hengkang Medical Group are ranked lower than 18 (%) 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.

Qingdao Choho Industrial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Qingdao Choho Industrial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qingdao Choho sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hengkang Medical and Qingdao Choho

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

The idea behind Hengkang Medical Group and Qingdao Choho Industrial 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.