Correlation Between Shenzhen Mindray and Cultural Investment

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

Diversification Opportunities for Shenzhen Mindray and Cultural Investment

0.41

Correlation Coefficient

Shenzhen Mindray  Cultural Investment

Very weak diversification

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

Pair Corralation between Shenzhen Mindray and Cultural Investment

Assuming the 90 days trading horizon Shenzhen Mindray is expected to generate 1.42 times less return on investment than Cultural Investment. In addition to that, Shenzhen Mindray is 1.12 times more volatile than Cultural Investment Holdings. It trades about 0.08 of its total potential returns per unit of risk. Cultural Investment Holdings is currently generating about 0.13 per unit of volatility. If you would invest  189.00  in Cultural Investment Holdings on September 12, 2024 and sell it today you would earn a total of  43.00  from holding Cultural Investment Holdings or generate 22.75% return on investment over 90 days.

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

Shenzhen Mindray Bio Medical  vs.  Cultural Investment Holdings

Shenzhen Mindray Bio

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Mindray Bio Medical are ranked lower than 6 (%) 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.

Cultural Investment

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Shenzhen Mindray and Cultural Investment

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

The idea behind Shenzhen Mindray Bio Medical and Cultural Investment Holdings 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.