Correlation Between Shin Tai and MedFirst Healthcare

Can any of the company-specific risk be diversified away by investing in both Shin Tai and MedFirst 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 Shin Tai and MedFirst Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shin Tai Industry and MedFirst Healthcare Services, you can compare the effects of market volatilities on Shin Tai and MedFirst 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 Shin Tai with a short position of MedFirst Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin Tai and MedFirst Healthcare.

Diversification Opportunities for Shin Tai and MedFirst Healthcare

0.77

Correlation Coefficient

Shin Tai  MedFirst Healthcare

Poor diversification

The 3 months correlation between Shin and MedFirst is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Shin Tai Industry and MedFirst Healthcare Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MedFirst Healthcare and Shin Tai 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 Shin Tai Industry are associated (or correlated) with MedFirst Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MedFirst Healthcare has no effect on the direction of Shin Tai i.e., Shin Tai and MedFirst Healthcare go up and down completely randomly.

Pair Corralation between Shin Tai and MedFirst Healthcare

Assuming the 90 days trading horizon Shin Tai Industry is expected to generate 1.0 times more return on investment than MedFirst Healthcare. However, Shin Tai Industry is 1.0 times less risky than MedFirst Healthcare. It trades about 0.05 of its potential returns per unit of risk. MedFirst Healthcare Services is currently generating about 0.0 per unit of risk. If you would invest  6,890  in Shin Tai Industry on September 20, 2024 and sell it today you would earn a total of  3,360  from holding Shin Tai Industry or generate 48.77% return on investment over 90 days.

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

Shin Tai Industry  vs.  MedFirst Healthcare Services

Shin Tai Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shin Tai Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

MedFirst Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MedFirst Healthcare Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Shin Tai and MedFirst Healthcare

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

The idea behind Shin Tai Industry and MedFirst Healthcare Services 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.