Correlation Between Changsha DIALINE and Mingchen Health

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

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

Diversification Opportunities for Changsha DIALINE and Mingchen Health

0.94

Correlation Coefficient

Changsha DIALINE  Mingchen Health

Almost no diversification

The 3 months correlation between Changsha and Mingchen is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Changsha DIALINE New and Mingchen Health Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mingchen Health and Changsha DIALINE 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 Changsha DIALINE New are associated (or correlated) with Mingchen Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mingchen Health has no effect on the direction of Changsha DIALINE i.e., Changsha DIALINE and Mingchen Health go up and down completely randomly.

Pair Corralation between Changsha DIALINE and Mingchen Health

Assuming the 90 days trading horizon Changsha DIALINE New is expected to generate 1.49 times more return on investment than Mingchen Health. However, Changsha DIALINE is 1.49 times more volatile than Mingchen Health Co. It trades about 0.13 of its potential returns per unit of risk. Mingchen Health Co is currently generating about 0.16 per unit of risk. If you would invest  599.00  in Changsha DIALINE New on September 3, 2024 and sell it today you would earn a total of  238.00  from holding Changsha DIALINE New or generate 39.73% return on investment over 90 days.

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

Changsha DIALINE New  vs.  Mingchen Health Co

Changsha DIALINE New

Risk-Adjusted Performance

10 of 100

OK

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

Mingchen Health

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mingchen Health Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mingchen Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Changsha DIALINE and Mingchen Health

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

The idea behind Changsha DIALINE New and Mingchen Health 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.