Correlation Between Hengkang Medical and Dalian Thermal

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

Diversification Opportunities for Hengkang Medical and Dalian Thermal

0.61

Correlation Coefficient

Hengkang Medical  Dalian Thermal

Poor diversification

The 3 months correlation between Hengkang and Dalian is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Hengkang Medical Group and Dalian Thermal Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dalian Thermal Power 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 Dalian Thermal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dalian Thermal Power has no effect on the direction of Hengkang Medical i.e., Hengkang Medical and Dalian Thermal go up and down completely randomly.

Pair Corralation between Hengkang Medical and Dalian Thermal

Assuming the 90 days trading horizon Hengkang Medical Group is expected to under-perform the Dalian Thermal. But the stock apears to be less risky and, when comparing its historical volatility, Hengkang Medical Group is 1.36 times less risky than Dalian Thermal. The stock trades about -0.04 of its potential returns per unit of risk. The Dalian Thermal Power is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  540.00  in Dalian Thermal Power on October 5, 2024 and sell it today you would earn a total of  140.00  from holding Dalian Thermal Power or generate 25.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.77%
Values	Daily Returns

Hengkang Medical Group  vs.  Dalian Thermal Power

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.

Dalian Thermal Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dalian Thermal Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dalian Thermal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hengkang Medical and Dalian Thermal

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

The idea behind Hengkang Medical Group and Dalian Thermal Power 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.