Correlation Between Hengkang Medical and Jiangsu Rongtai

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

Diversification Opportunities for Hengkang Medical and Jiangsu Rongtai

0.08

Correlation Coefficient

Hengkang Medical  Jiangsu Rongtai

Significant diversification

The 3 months correlation between Hengkang and Jiangsu is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Hengkang Medical Group and Jiangsu Rongtai Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Rongtai Industry 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 Jiangsu Rongtai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Rongtai Industry has no effect on the direction of Hengkang Medical i.e., Hengkang Medical and Jiangsu Rongtai go up and down completely randomly.

Pair Corralation between Hengkang Medical and Jiangsu Rongtai

Assuming the 90 days trading horizon Hengkang Medical Group is expected to under-perform the Jiangsu Rongtai. But the stock apears to be less risky and, when comparing its historical volatility, Hengkang Medical Group is 1.4 times less risky than Jiangsu Rongtai. The stock trades about -0.08 of its potential returns per unit of risk. The Jiangsu Rongtai Industry is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,397  in Jiangsu Rongtai Industry on December 25, 2024 and sell it today you would earn a total of  991.00  from holding Jiangsu Rongtai Industry or generate 41.34% 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.  Jiangsu Rongtai Industry

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.

Jiangsu Rongtai Industry

Risk-Adjusted Performance

Good

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

Pair Trading with Hengkang Medical and Jiangsu Rongtai

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

The idea behind Hengkang Medical Group and Jiangsu Rongtai Industry 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.