Correlation Between China Medical and Genertec Universal

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

By analyzing existing cross correlation between China Medical System and Genertec Universal Medical, you can compare the effects of market volatilities on China Medical and Genertec Universal 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 China Medical with a short position of Genertec Universal. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Medical and Genertec Universal.

Diversification Opportunities for China Medical and Genertec Universal

0.09

Correlation Coefficient

China Medical  Genertec Universal

Significant diversification

The 3 months correlation between China and Genertec is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding China Medical System and Genertec Universal Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genertec Universal and China 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 China Medical System are associated (or correlated) with Genertec Universal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genertec Universal has no effect on the direction of China Medical i.e., China Medical and Genertec Universal go up and down completely randomly.

Pair Corralation between China Medical and Genertec Universal

Assuming the 90 days trading horizon China Medical System is expected to under-perform the Genertec Universal. But the stock apears to be less risky and, when comparing its historical volatility, China Medical System is 1.7 times less risky than Genertec Universal. The stock trades about -0.04 of its potential returns per unit of risk. The Genertec Universal Medical is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  53.00  in Genertec Universal Medical on October 6, 2024 and sell it today you would earn a total of  4.00  from holding Genertec Universal Medical or generate 7.55% return on investment over 90 days.

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

China Medical System  vs.  Genertec Universal Medical

China Medical System

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Medical System has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Genertec Universal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genertec Universal Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Genertec Universal is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with China Medical and Genertec Universal

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

The idea behind China Medical System and Genertec Universal Medical 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.