Correlation Between Heren Health and Nantong Haixing

Can any of the company-specific risk be diversified away by investing in both Heren Health and Nantong Haixing 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 Nantong Haixing 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 Nantong Haixing Electronics, you can compare the effects of market volatilities on Heren Health and Nantong Haixing 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 Nantong Haixing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heren Health and Nantong Haixing.

Diversification Opportunities for Heren Health and Nantong Haixing

0.41

Correlation Coefficient

Heren Health  Nantong Haixing

Very weak diversification

The 3 months correlation between Heren and Nantong is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Heren Health Co and Nantong Haixing Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nantong Haixing Elec 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 Nantong Haixing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nantong Haixing Elec has no effect on the direction of Heren Health i.e., Heren Health and Nantong Haixing go up and down completely randomly.

Pair Corralation between Heren Health and Nantong Haixing

Assuming the 90 days trading horizon Heren Health Co is expected to under-perform the Nantong Haixing. In addition to that, Heren Health is 2.32 times more volatile than Nantong Haixing Electronics. It trades about -0.07 of its total potential returns per unit of risk. Nantong Haixing Electronics is currently generating about 0.12 per unit of volatility. If you would invest  1,300  in Nantong Haixing Electronics on October 27, 2024 and sell it today you would earn a total of  57.00  from holding Nantong Haixing Electronics or generate 4.38% return on investment over 90 days.

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

Heren Health Co  vs.  Nantong Haixing Electronics

Heren Health

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nantong Haixing Elec

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Heren Health and Nantong Haixing

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

The idea behind Heren Health Co and Nantong Haixing Electronics 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.