Correlation Between Nanjing Putian and Zhende Medical

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

By analyzing existing cross correlation between Nanjing Putian Telecommunications and Zhende Medical Co, you can compare the effects of market volatilities on Nanjing Putian and Zhende Medical 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 Nanjing Putian with a short position of Zhende Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nanjing Putian and Zhende Medical.

Diversification Opportunities for Nanjing Putian and Zhende Medical

0.7

Correlation Coefficient

Nanjing Putian  Zhende Medical

Poor diversification

The 3 months correlation between Nanjing and Zhende is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Nanjing Putian Telecommunicati and Zhende Medical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhende Medical and Nanjing Putian 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 Nanjing Putian Telecommunications are associated (or correlated) with Zhende Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhende Medical has no effect on the direction of Nanjing Putian i.e., Nanjing Putian and Zhende Medical go up and down completely randomly.

Pair Corralation between Nanjing Putian and Zhende Medical

Assuming the 90 days trading horizon Nanjing Putian Telecommunications is expected to under-perform the Zhende Medical. In addition to that, Nanjing Putian is 3.46 times more volatile than Zhende Medical Co. It trades about -0.07 of its total potential returns per unit of risk. Zhende Medical Co is currently generating about -0.03 per unit of volatility. If you would invest  2,264  in Zhende Medical Co on September 26, 2024 and sell it today you would lose (22.00) from holding Zhende Medical Co or give up 0.97% of portfolio value over 90 days.

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

Nanjing Putian Telecommunicati  vs.  Zhende Medical Co

Nanjing Putian Telec

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nanjing Putian Telecommunications are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nanjing Putian sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhende Medical

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Nanjing Putian and Zhende Medical

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

The idea behind Nanjing Putian Telecommunications and Zhende Medical 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.