Correlation Between Sanbo Hospital and Shenzhen Mindray

Can any of the company-specific risk be diversified away by investing in both Sanbo Hospital and Shenzhen Mindray 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 Sanbo Hospital and Shenzhen Mindray into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sanbo Hospital Management and Shenzhen Mindray Bio Medical, you can compare the effects of market volatilities on Sanbo Hospital and Shenzhen Mindray 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 Sanbo Hospital with a short position of Shenzhen Mindray. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sanbo Hospital and Shenzhen Mindray.

Diversification Opportunities for Sanbo Hospital and Shenzhen Mindray

0.62

Correlation Coefficient

Sanbo Hospital  Shenzhen Mindray

Poor diversification

The 3 months correlation between Sanbo and Shenzhen is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Sanbo Hospital Management and Shenzhen Mindray Bio Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Mindray Bio and Sanbo Hospital 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 Sanbo Hospital Management are associated (or correlated) with Shenzhen Mindray. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Mindray Bio has no effect on the direction of Sanbo Hospital i.e., Sanbo Hospital and Shenzhen Mindray go up and down completely randomly.

Pair Corralation between Sanbo Hospital and Shenzhen Mindray

Assuming the 90 days trading horizon Sanbo Hospital Management is expected to generate 2.3 times more return on investment than Shenzhen Mindray. However, Sanbo Hospital is 2.3 times more volatile than Shenzhen Mindray Bio Medical. It trades about 0.08 of its potential returns per unit of risk. Shenzhen Mindray Bio Medical is currently generating about -0.06 per unit of risk. If you would invest  4,775  in Sanbo Hospital Management on December 13, 2024 and sell it today you would earn a total of  634.00  from holding Sanbo Hospital Management or generate 13.28% return on investment over 90 days.

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

Sanbo Hospital Management  vs.  Shenzhen Mindray Bio Medical

Sanbo Hospital Management

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sanbo Hospital Management are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sanbo Hospital sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen Mindray Bio

Risk-Adjusted Performance

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 somewhat strong basic indicators, Shenzhen Mindray is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sanbo Hospital and Shenzhen Mindray

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

The idea behind Sanbo Hospital Management and Shenzhen Mindray Bio 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.