Correlation Between Allmed Medical and Henan Provincial

Can any of the company-specific risk be diversified away by investing in both Allmed Medical and Henan Provincial 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 Allmed Medical and Henan Provincial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Allmed Medical Products and Henan Provincial Communications, you can compare the effects of market volatilities on Allmed Medical and Henan Provincial 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 Allmed Medical with a short position of Henan Provincial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allmed Medical and Henan Provincial.

Diversification Opportunities for Allmed Medical and Henan Provincial

-0.23

Correlation Coefficient

Allmed Medical  Henan Provincial

Very good diversification

The 3 months correlation between Allmed and Henan is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Allmed Medical Products and Henan Provincial Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henan Provincial Com and Allmed Medical 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 Allmed Medical Products are associated (or correlated) with Henan Provincial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henan Provincial Com has no effect on the direction of Allmed Medical i.e., Allmed Medical and Henan Provincial go up and down completely randomly.

Pair Corralation between Allmed Medical and Henan Provincial

Assuming the 90 days trading horizon Allmed Medical Products is expected to generate 1.02 times more return on investment than Henan Provincial. However, Allmed Medical is 1.02 times more volatile than Henan Provincial Communications. It trades about 0.08 of its potential returns per unit of risk. Henan Provincial Communications is currently generating about -0.16 per unit of risk. If you would invest  852.00  in Allmed Medical Products on October 25, 2024 and sell it today you would earn a total of  105.00  from holding Allmed Medical Products or generate 12.32% return on investment over 90 days.

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

Allmed Medical Products  vs.  Henan Provincial Communication

Allmed Medical Products

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Allmed Medical Products are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Allmed Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Henan Provincial Com

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Henan Provincial Communications 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.

Pair Trading with Allmed Medical and Henan Provincial

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

The idea behind Allmed Medical Products and Henan Provincial Communications 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.