Correlation Between Jinhe Biotechnology and CareRay Digital

Can any of the company-specific risk be diversified away by investing in both Jinhe Biotechnology and CareRay Digital 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 Jinhe Biotechnology and CareRay Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jinhe Biotechnology Co and CareRay Digital Medical, you can compare the effects of market volatilities on Jinhe Biotechnology and CareRay Digital 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 Jinhe Biotechnology with a short position of CareRay Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jinhe Biotechnology and CareRay Digital.

Diversification Opportunities for Jinhe Biotechnology and CareRay Digital

0.81

Correlation Coefficient

Jinhe Biotechnology  CareRay Digital

Very poor diversification

The 3 months correlation between Jinhe and CareRay is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Jinhe Biotechnology Co and CareRay Digital Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareRay Digital Medical and Jinhe Biotechnology 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 Jinhe Biotechnology Co are associated (or correlated) with CareRay Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareRay Digital Medical has no effect on the direction of Jinhe Biotechnology i.e., Jinhe Biotechnology and CareRay Digital go up and down completely randomly.

Pair Corralation between Jinhe Biotechnology and CareRay Digital

Assuming the 90 days trading horizon Jinhe Biotechnology Co is expected to generate 0.83 times more return on investment than CareRay Digital. However, Jinhe Biotechnology Co is 1.21 times less risky than CareRay Digital. It trades about -0.04 of its potential returns per unit of risk. CareRay Digital Medical is currently generating about -0.1 per unit of risk. If you would invest  446.00  in Jinhe Biotechnology Co on October 7, 2024 and sell it today you would lose (21.00) from holding Jinhe Biotechnology Co or give up 4.71% of portfolio value over 90 days.

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

Jinhe Biotechnology Co  vs.  CareRay Digital Medical

Jinhe Biotechnology

Risk-Adjusted Performance

0 of 100

Very Weak

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

CareRay Digital Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CareRay Digital Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Jinhe Biotechnology and CareRay Digital

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

The idea behind Jinhe Biotechnology Co and CareRay Digital Medical 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.