Correlation Between Heren Health and Lushang Property

Can any of the company-specific risk be diversified away by investing in both Heren Health and Lushang Property 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 Heren Health and Lushang Property into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Heren Health Co and Lushang Property Co, you can compare the effects of market volatilities on Heren Health and Lushang Property 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 Heren Health with a short position of Lushang Property. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heren Health and Lushang Property.

Diversification Opportunities for Heren Health and Lushang Property

0.83

Correlation Coefficient

Heren Health  Lushang Property

Very poor diversification

The 3 months correlation between Heren and Lushang is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Heren Health Co and Lushang Property Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lushang Property and Heren Health 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 Heren Health Co are associated (or correlated) with Lushang Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lushang Property has no effect on the direction of Heren Health i.e., Heren Health and Lushang Property go up and down completely randomly.

Pair Corralation between Heren Health and Lushang Property

Assuming the 90 days trading horizon Heren Health Co is expected to generate 1.62 times more return on investment than Lushang Property. However, Heren Health is 1.62 times more volatile than Lushang Property Co. It trades about 0.13 of its potential returns per unit of risk. Lushang Property Co is currently generating about 0.12 per unit of risk. If you would invest  1,074  in Heren Health Co on September 10, 2024 and sell it today you would earn a total of  346.00  from holding Heren Health Co or generate 32.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.31%
Values	Daily Returns

Heren Health Co  vs.  Lushang Property Co

Heren Health

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heren Health Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Heren Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Lushang Property

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lushang Property Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lushang Property sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Heren Health and Lushang Property

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

The idea behind Heren Health Co and Lushang Property 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.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.