Correlation Between Shenzhen Mindray and CareRay Digital

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

Diversification Opportunities for Shenzhen Mindray and CareRay Digital

0.49

Correlation Coefficient

Shenzhen Mindray  CareRay Digital

Very weak diversification

The 3 months correlation between Shenzhen and CareRay is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Mindray Bio Medical and CareRay Digital Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareRay Digital Medical 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 CareRay Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareRay Digital Medical has no effect on the direction of Shenzhen Mindray i.e., Shenzhen Mindray and CareRay Digital go up and down completely randomly.

Pair Corralation between Shenzhen Mindray and CareRay Digital

Assuming the 90 days trading horizon Shenzhen Mindray Bio Medical is expected to under-perform the CareRay Digital. But the stock apears to be less risky and, when comparing its historical volatility, Shenzhen Mindray Bio Medical is 1.62 times less risky than CareRay Digital. The stock trades about -0.02 of its potential returns per unit of risk. The CareRay Digital Medical is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,140  in CareRay Digital Medical on October 23, 2024 and sell it today you would lose (734.00) from holding CareRay Digital Medical or give up 34.3% of portfolio value over 90 days.

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

Shenzhen Mindray Bio Medical  vs.  CareRay Digital Medical

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.

CareRay Digital Medical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CareRay Digital Medical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CareRay Digital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shenzhen Mindray and CareRay Digital

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

The idea behind Shenzhen Mindray Bio Medical and CareRay Digital Medical 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.