Correlation Between Mingchen Health and PKU HealthCare

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

By analyzing existing cross correlation between Mingchen Health Co and PKU HealthCare Corp, you can compare the effects of market volatilities on Mingchen Health and PKU HealthCare 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 Mingchen Health with a short position of PKU HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mingchen Health and PKU HealthCare.

Diversification Opportunities for Mingchen Health and PKU HealthCare

0.69

Correlation Coefficient

Mingchen Health  PKU HealthCare

Poor diversification

The 3 months correlation between Mingchen and PKU is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Mingchen Health Co and PKU HealthCare Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PKU HealthCare Corp and Mingchen Health 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 Mingchen Health Co are associated (or correlated) with PKU HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PKU HealthCare Corp has no effect on the direction of Mingchen Health i.e., Mingchen Health and PKU HealthCare go up and down completely randomly.

Pair Corralation between Mingchen Health and PKU HealthCare

Assuming the 90 days trading horizon Mingchen Health Co is expected to under-perform the PKU HealthCare. But the stock apears to be less risky and, when comparing its historical volatility, Mingchen Health Co is 1.07 times less risky than PKU HealthCare. The stock trades about -0.04 of its potential returns per unit of risk. The PKU HealthCare Corp is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  663.00  in PKU HealthCare Corp on October 10, 2024 and sell it today you would lose (38.00) from holding PKU HealthCare Corp or give up 5.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Mingchen Health Co  vs.  PKU HealthCare Corp

Mingchen Health

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mingchen Health Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mingchen Health may actually be approaching a critical reversion point that can send shares even higher in February 2025.

PKU HealthCare Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PKU HealthCare Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PKU HealthCare may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Mingchen Health and PKU HealthCare

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

The idea behind Mingchen Health Co and PKU HealthCare Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.