Correlation Between First Capital and Huadong Medicine

Can any of the company-specific risk be diversified away by investing in both First Capital and Huadong Medicine 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 First Capital and Huadong Medicine into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Capital Securities and Huadong Medicine Co, you can compare the effects of market volatilities on First Capital and Huadong Medicine 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 First Capital with a short position of Huadong Medicine. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Capital and Huadong Medicine.

Diversification Opportunities for First Capital and Huadong Medicine

0.0

Correlation Coefficient

First Capital  Huadong Medicine

Pay attention - limited upside

The 3 months correlation between First and Huadong is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First Capital Securities and Huadong Medicine Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huadong Medicine and First Capital 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 First Capital Securities are associated (or correlated) with Huadong Medicine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huadong Medicine has no effect on the direction of First Capital i.e., First Capital and Huadong Medicine go up and down completely randomly.

Pair Corralation between First Capital and Huadong Medicine

If you would invest (100.00) in First Capital Securities on October 12, 2024 and sell it today you would earn a total of  100.00  from holding First Capital Securities or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

First Capital Securities  vs.  Huadong Medicine Co

First Capital Securities

Risk-Adjusted Performance

0 of 100

Very Weak

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

Huadong Medicine

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with First Capital and Huadong Medicine

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

The idea behind First Capital Securities and Huadong Medicine Co 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.