Correlation Between Shenzhen Mindray and Hangzhou EZVIZ

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

Diversification Opportunities for Shenzhen Mindray and Hangzhou EZVIZ

0.71

Correlation Coefficient

Shenzhen Mindray  Hangzhou EZVIZ

Poor diversification

The 3 months correlation between Shenzhen and Hangzhou is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Mindray Bio Medical and Hangzhou EZVIZ Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou EZVIZ Network 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 Hangzhou EZVIZ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou EZVIZ Network has no effect on the direction of Shenzhen Mindray i.e., Shenzhen Mindray and Hangzhou EZVIZ go up and down completely randomly.

Pair Corralation between Shenzhen Mindray and Hangzhou EZVIZ

Assuming the 90 days trading horizon Shenzhen Mindray Bio Medical is expected to under-perform the Hangzhou EZVIZ. But the stock apears to be less risky and, when comparing its historical volatility, Shenzhen Mindray Bio Medical is 1.35 times less risky than Hangzhou EZVIZ. The stock trades about -0.01 of its potential returns per unit of risk. The Hangzhou EZVIZ Network is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,214  in Hangzhou EZVIZ Network on October 3, 2024 and sell it today you would lose (195.00) from holding Hangzhou EZVIZ Network or give up 6.07% of portfolio value over 90 days.

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

Shenzhen Mindray Bio Medical  vs.  Hangzhou EZVIZ Network

Shenzhen Mindray Bio

Risk-Adjusted Performance

0 of 100

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.

Hangzhou EZVIZ Network

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hangzhou EZVIZ Network 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.

Pair Trading with Shenzhen Mindray and Hangzhou EZVIZ

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

The idea behind Shenzhen Mindray Bio Medical and Hangzhou EZVIZ Network 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.