Correlation Between Hengkang Medical and Tianjin Realty

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

Diversification Opportunities for Hengkang Medical and Tianjin Realty

0.7

Correlation Coefficient

Hengkang Medical  Tianjin Realty

Poor diversification

The 3 months correlation between Hengkang and Tianjin is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Hengkang Medical Group and Tianjin Realty Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin Realty Devel 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 Tianjin Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin Realty Devel has no effect on the direction of Hengkang Medical i.e., Hengkang Medical and Tianjin Realty go up and down completely randomly.

Pair Corralation between Hengkang Medical and Tianjin Realty

Assuming the 90 days trading horizon Hengkang Medical is expected to generate 9.75 times less return on investment than Tianjin Realty. But when comparing it to its historical volatility, Hengkang Medical Group is 1.15 times less risky than Tianjin Realty. It trades about 0.01 of its potential returns per unit of risk. Tianjin Realty Development is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  219.00  in Tianjin Realty Development on October 7, 2024 and sell it today you would earn a total of  74.00  from holding Tianjin Realty Development or generate 33.79% 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.  Tianjin Realty Development

Hengkang Medical

Risk-Adjusted Performance

2 of 100

Weak

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.

Tianjin Realty Devel

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Realty Development are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianjin Realty sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hengkang Medical and Tianjin Realty

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

The idea behind Hengkang Medical Group and Tianjin Realty Development 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.