Correlation Between Zhonghong Pulin and Xiangyu Medical

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

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

Diversification Opportunities for Zhonghong Pulin and Xiangyu Medical

0.88

Correlation Coefficient

Zhonghong Pulin  Xiangyu Medical

Very poor diversification

The 3 months correlation between Zhonghong and Xiangyu is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Zhonghong Pulin Medical and Xiangyu Medical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiangyu Medical and Zhonghong Pulin 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 Zhonghong Pulin Medical are associated (or correlated) with Xiangyu Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiangyu Medical has no effect on the direction of Zhonghong Pulin i.e., Zhonghong Pulin and Xiangyu Medical go up and down completely randomly.

Pair Corralation between Zhonghong Pulin and Xiangyu Medical

Assuming the 90 days trading horizon Zhonghong Pulin Medical is expected to under-perform the Xiangyu Medical. But the stock apears to be less risky and, when comparing its historical volatility, Zhonghong Pulin Medical is 1.53 times less risky than Xiangyu Medical. The stock trades about -0.15 of its potential returns per unit of risk. The Xiangyu Medical Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,199  in Xiangyu Medical Co on September 22, 2024 and sell it today you would earn a total of  192.00  from holding Xiangyu Medical Co or generate 6.0% return on investment over 90 days.

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

Zhonghong Pulin Medical  vs.  Xiangyu Medical Co

Zhonghong Pulin Medical

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhonghong Pulin Medical are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhonghong Pulin sustained solid returns over the last few months and may actually be approaching a breakup point.

Xiangyu Medical

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xiangyu Medical Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiangyu Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhonghong Pulin and Xiangyu Medical

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

The idea behind Zhonghong Pulin Medical and Xiangyu 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.