Correlation Between Hainan Shuangcheng and Lotus Health

Can any of the company-specific risk be diversified away by investing in both Hainan Shuangcheng and Lotus Health 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 Hainan Shuangcheng and Lotus Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hainan Shuangcheng Pharmaceut and Lotus Health Group, you can compare the effects of market volatilities on Hainan Shuangcheng and Lotus Health 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 Hainan Shuangcheng with a short position of Lotus Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hainan Shuangcheng and Lotus Health.

Diversification Opportunities for Hainan Shuangcheng and Lotus Health

-0.33

Correlation Coefficient

Hainan Shuangcheng  Lotus Health

Very good diversification

The 3 months correlation between Hainan and Lotus is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Shuangcheng Pharmaceut and Lotus Health Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Health Group and Hainan Shuangcheng 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 Hainan Shuangcheng Pharmaceut are associated (or correlated) with Lotus Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Health Group has no effect on the direction of Hainan Shuangcheng i.e., Hainan Shuangcheng and Lotus Health go up and down completely randomly.

Pair Corralation between Hainan Shuangcheng and Lotus Health

Assuming the 90 days trading horizon Hainan Shuangcheng Pharmaceut is expected to under-perform the Lotus Health. In addition to that, Hainan Shuangcheng is 1.27 times more volatile than Lotus Health Group. It trades about -0.23 of its total potential returns per unit of risk. Lotus Health Group is currently generating about 0.06 per unit of volatility. If you would invest  460.00  in Lotus Health Group on October 25, 2024 and sell it today you would earn a total of  56.00  from holding Lotus Health Group or generate 12.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Hainan Shuangcheng Pharmaceut  vs.  Lotus Health Group

Hainan Shuangcheng

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hainan Shuangcheng Pharmaceut 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Lotus Health Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lotus Health Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lotus Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hainan Shuangcheng and Lotus Health

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

The idea behind Hainan Shuangcheng Pharmaceut and Lotus Health Group 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.