Correlation Between Eit Environmental and Zhende Medical

Can any of the company-specific risk be diversified away by investing in both Eit Environmental and Zhende Medical 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 Eit Environmental and Zhende Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eit Environmental Development and Zhende Medical Co, you can compare the effects of market volatilities on Eit Environmental and Zhende Medical 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 Eit Environmental with a short position of Zhende Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eit Environmental and Zhende Medical.

Diversification Opportunities for Eit Environmental and Zhende Medical

0.39

Correlation Coefficient

Eit Environmental  Zhende Medical

Weak diversification

The 3 months correlation between Eit and Zhende is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Eit Environmental Development and Zhende Medical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhende Medical and Eit Environmental 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 Eit Environmental Development are associated (or correlated) with Zhende Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhende Medical has no effect on the direction of Eit Environmental i.e., Eit Environmental and Zhende Medical go up and down completely randomly.

Pair Corralation between Eit Environmental and Zhende Medical

Assuming the 90 days trading horizon Eit Environmental Development is expected to generate 1.85 times more return on investment than Zhende Medical. However, Eit Environmental is 1.85 times more volatile than Zhende Medical Co. It trades about 0.07 of its potential returns per unit of risk. Zhende Medical Co is currently generating about -0.04 per unit of risk. If you would invest  1,601  in Eit Environmental Development on December 29, 2024 and sell it today you would earn a total of  109.00  from holding Eit Environmental Development or generate 6.81% return on investment over 90 days.

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

Eit Environmental Development  vs.  Zhende Medical Co

Eit Environmental

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eit Environmental Development are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eit Environmental may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Zhende Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zhende Medical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Zhende Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eit Environmental and Zhende Medical

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

The idea behind Eit Environmental Development and Zhende Medical Co 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.