Correlation Between Shantou Wanshun and Eyebright Medical

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

By analyzing existing cross correlation between Shantou Wanshun Package and Eyebright Medical Technology, you can compare the effects of market volatilities on Shantou Wanshun and Eyebright 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 Shantou Wanshun with a short position of Eyebright Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shantou Wanshun and Eyebright Medical.

Diversification Opportunities for Shantou Wanshun and Eyebright Medical

0.73

Correlation Coefficient

Shantou Wanshun  Eyebright Medical

Poor diversification

The 3 months correlation between Shantou and Eyebright is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Shantou Wanshun Package and Eyebright Medical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eyebright Medical and Shantou Wanshun 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 Shantou Wanshun Package are associated (or correlated) with Eyebright Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eyebright Medical has no effect on the direction of Shantou Wanshun i.e., Shantou Wanshun and Eyebright Medical go up and down completely randomly.

Pair Corralation between Shantou Wanshun and Eyebright Medical

Assuming the 90 days trading horizon Shantou Wanshun is expected to generate 1.1 times less return on investment than Eyebright Medical. But when comparing it to its historical volatility, Shantou Wanshun Package is 1.01 times less risky than Eyebright Medical. It trades about 0.07 of its potential returns per unit of risk. Eyebright Medical Technology is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7,250  in Eyebright Medical Technology on September 29, 2024 and sell it today you would earn a total of  2,005  from holding Eyebright Medical Technology or generate 27.66% return on investment over 90 days.

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

Shantou Wanshun Package  vs.  Eyebright Medical Technology

Shantou Wanshun Package

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shantou Wanshun Package has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shantou Wanshun is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eyebright Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eyebright Medical Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Eyebright Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shantou Wanshun and Eyebright Medical

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

The idea behind Shantou Wanshun Package and Eyebright Medical Technology 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 Valuation module to check real value of public entities based on technical and fundamental data.