Correlation Between Mingchen Health and GreenTech Environmental

Can any of the company-specific risk be diversified away by investing in both Mingchen Health and GreenTech Environmental 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 GreenTech Environmental 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 GreenTech Environmental Co, you can compare the effects of market volatilities on Mingchen Health and GreenTech Environmental 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 GreenTech Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mingchen Health and GreenTech Environmental.

Diversification Opportunities for Mingchen Health and GreenTech Environmental

0.79

Correlation Coefficient

Mingchen Health  GreenTech Environmental

Poor diversification

The 3 months correlation between Mingchen and GreenTech is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Mingchen Health Co and GreenTech Environmental Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenTech Environmental 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 GreenTech Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenTech Environmental has no effect on the direction of Mingchen Health i.e., Mingchen Health and GreenTech Environmental go up and down completely randomly.

Pair Corralation between Mingchen Health and GreenTech Environmental

Assuming the 90 days trading horizon Mingchen Health is expected to generate 5.65 times less return on investment than GreenTech Environmental. In addition to that, Mingchen Health is 1.1 times more volatile than GreenTech Environmental Co. It trades about 0.02 of its total potential returns per unit of risk. GreenTech Environmental Co is currently generating about 0.12 per unit of volatility. If you would invest  1,389  in GreenTech Environmental Co on December 27, 2024 and sell it today you would earn a total of  257.00  from holding GreenTech Environmental Co or generate 18.5% return on investment over 90 days.

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

Mingchen Health Co  vs.  GreenTech Environmental Co

Mingchen Health

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mingchen Health Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Mingchen Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

GreenTech Environmental

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GreenTech Environmental Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GreenTech Environmental sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mingchen Health and GreenTech Environmental

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

The idea behind Mingchen Health Co and GreenTech Environmental 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.