Correlation Between East Money and Humanwell Healthcare

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

By analyzing existing cross correlation between East Money Information and Humanwell Healthcare Group, you can compare the effects of market volatilities on East Money and Humanwell 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 East Money with a short position of Humanwell Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Money and Humanwell Healthcare.

Diversification Opportunities for East Money and Humanwell Healthcare

0.59

Correlation Coefficient

East Money  Humanwell Healthcare

Very weak diversification

The 3 months correlation between East and Humanwell is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding East Money Information and Humanwell Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humanwell Healthcare and East Money 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 East Money Information are associated (or correlated) with Humanwell Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Humanwell Healthcare has no effect on the direction of East Money i.e., East Money and Humanwell Healthcare go up and down completely randomly.

Pair Corralation between East Money and Humanwell Healthcare

Assuming the 90 days trading horizon East Money Information is expected to generate 1.91 times more return on investment than Humanwell Healthcare. However, East Money is 1.91 times more volatile than Humanwell Healthcare Group. It trades about 0.05 of its potential returns per unit of risk. Humanwell Healthcare Group is currently generating about 0.01 per unit of risk. If you would invest  2,085  in East Money Information on October 11, 2024 and sell it today you would earn a total of  171.00  from holding East Money Information or generate 8.2% return on investment over 90 days.

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

East Money Information  vs.  Humanwell Healthcare Group

East Money Information

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in East Money Information are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, East Money sustained solid returns over the last few months and may actually be approaching a breakup point.

Humanwell Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with East Money and Humanwell Healthcare

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

The idea behind East Money Information and Humanwell Healthcare Group 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.