Correlation Between Shenzhen Mindray and Leyard Optoelectronic

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

Diversification Opportunities for Shenzhen Mindray and Leyard Optoelectronic

0.69

Correlation Coefficient

Shenzhen Mindray  Leyard Optoelectronic

Poor diversification

The 3 months correlation between Shenzhen and Leyard is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Mindray Bio Medical and Leyard Optoelectronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leyard Optoelectronic 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 Leyard Optoelectronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leyard Optoelectronic has no effect on the direction of Shenzhen Mindray i.e., Shenzhen Mindray and Leyard Optoelectronic go up and down completely randomly.

Pair Corralation between Shenzhen Mindray and Leyard Optoelectronic

Assuming the 90 days trading horizon Shenzhen Mindray is expected to generate 2.97 times less return on investment than Leyard Optoelectronic. But when comparing it to its historical volatility, Shenzhen Mindray Bio Medical is 1.28 times less risky than Leyard Optoelectronic. It trades about 0.1 of its potential returns per unit of risk. Leyard Optoelectronic is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  387.00  in Leyard Optoelectronic on September 14, 2024 and sell it today you would earn a total of  285.00  from holding Leyard Optoelectronic or generate 73.64% return on investment over 90 days.

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

Shenzhen Mindray Bio Medical  vs.  Leyard Optoelectronic

Shenzhen Mindray Bio

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Mindray Bio Medical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Mindray sustained solid returns over the last few months and may actually be approaching a breakup point.

Leyard Optoelectronic

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Leyard Optoelectronic are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Leyard Optoelectronic sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Mindray and Leyard Optoelectronic

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

The idea behind Shenzhen Mindray Bio Medical and Leyard Optoelectronic 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..