Correlation Between Shenzhen Mindray and Beijing HuaYuanYiTong

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Can any of the company-specific risk be diversified away by investing in both Shenzhen Mindray and Beijing HuaYuanYiTong 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 Shenzhen Mindray and Beijing HuaYuanYiTong into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shenzhen Mindray Bio Medical and Beijing HuaYuanYiTong Thermal, you can compare the effects of market volatilities on Shenzhen Mindray and Beijing HuaYuanYiTong 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 Shenzhen Mindray with a short position of Beijing HuaYuanYiTong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Mindray and Beijing HuaYuanYiTong.

Diversification Opportunities for Shenzhen Mindray and Beijing HuaYuanYiTong

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between Shenzhen and Beijing is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Mindray Bio Medical and Beijing HuaYuanYiTong Thermal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing HuaYuanYiTong and Shenzhen Mindray 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 Shenzhen Mindray Bio Medical are associated (or correlated) with Beijing HuaYuanYiTong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing HuaYuanYiTong has no effect on the direction of Shenzhen Mindray i.e., Shenzhen Mindray and Beijing HuaYuanYiTong go up and down completely randomly.

Pair Corralation between Shenzhen Mindray and Beijing HuaYuanYiTong

Assuming the 90 days trading horizon Shenzhen Mindray Bio Medical is expected to under-perform the Beijing HuaYuanYiTong. But the stock apears to be less risky and, when comparing its historical volatility, Shenzhen Mindray Bio Medical is 1.64 times less risky than Beijing HuaYuanYiTong. The stock trades about -0.13 of its potential returns per unit of risk. The Beijing HuaYuanYiTong Thermal is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,110  in Beijing HuaYuanYiTong Thermal on October 22, 2024 and sell it today you would lose (153.00) from holding Beijing HuaYuanYiTong Thermal or give up 13.78% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Shenzhen Mindray Bio Medical  vs.  Beijing HuaYuanYiTong Thermal

 Performance 
       Timeline  
Shenzhen Mindray Bio 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Shenzhen Mindray Bio Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Beijing HuaYuanYiTong 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Beijing HuaYuanYiTong Thermal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Shenzhen Mindray and Beijing HuaYuanYiTong Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shenzhen Mindray and Beijing HuaYuanYiTong

The main advantage of trading using opposite Shenzhen Mindray and Beijing HuaYuanYiTong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenzhen Mindray position performs unexpectedly, Beijing HuaYuanYiTong 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 Beijing HuaYuanYiTong will offset losses from the drop in Beijing HuaYuanYiTong's long position.
The idea behind Shenzhen Mindray Bio Medical and Beijing HuaYuanYiTong Thermal 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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