Correlation Between Hengkang Medical and Suzhou Douson

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

Diversification Opportunities for Hengkang Medical and Suzhou Douson

0.16

Correlation Coefficient

Hengkang Medical  Suzhou Douson

Average diversification

The 3 months correlation between Hengkang and Suzhou is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Hengkang Medical Group and Suzhou Douson Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou Douson Drilling 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 Suzhou Douson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou Douson Drilling has no effect on the direction of Hengkang Medical i.e., Hengkang Medical and Suzhou Douson go up and down completely randomly.

Pair Corralation between Hengkang Medical and Suzhou Douson

Assuming the 90 days trading horizon Hengkang Medical Group is expected to under-perform the Suzhou Douson. But the stock apears to be less risky and, when comparing its historical volatility, Hengkang Medical Group is 1.45 times less risky than Suzhou Douson. The stock trades about -0.12 of its potential returns per unit of risk. The Suzhou Douson Drilling is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,525  in Suzhou Douson Drilling on December 26, 2024 and sell it today you would earn a total of  789.00  from holding Suzhou Douson Drilling or generate 31.25% return on investment over 90 days.

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

Hengkang Medical Group  vs.  Suzhou Douson Drilling

Hengkang Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hengkang Medical Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Suzhou Douson Drilling

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Douson Drilling are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Suzhou Douson sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hengkang Medical and Suzhou Douson

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

The idea behind Hengkang Medical Group and Suzhou Douson Drilling 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.