Correlation Between Sanbo Hospital and Liuzhou Chemical

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Can any of the company-specific risk be diversified away by investing in both Sanbo Hospital and Liuzhou Chemical 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 Liuzhou Chemical 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 Liuzhou Chemical Industry, you can compare the effects of market volatilities on Sanbo Hospital and Liuzhou Chemical 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 Liuzhou Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sanbo Hospital and Liuzhou Chemical.

Diversification Opportunities for Sanbo Hospital and Liuzhou Chemical

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Sanbo and Liuzhou is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Sanbo Hospital Management and Liuzhou Chemical Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liuzhou Chemical Industry 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 Liuzhou Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liuzhou Chemical Industry has no effect on the direction of Sanbo Hospital i.e., Sanbo Hospital and Liuzhou Chemical go up and down completely randomly.

Pair Corralation between Sanbo Hospital and Liuzhou Chemical

Assuming the 90 days trading horizon Sanbo Hospital is expected to generate 1.0 times less return on investment than Liuzhou Chemical. In addition to that, Sanbo Hospital is 1.5 times more volatile than Liuzhou Chemical Industry. It trades about 0.07 of its total potential returns per unit of risk. Liuzhou Chemical Industry is currently generating about 0.11 per unit of volatility. If you would invest  235.00  in Liuzhou Chemical Industry on September 24, 2024 and sell it today you would earn a total of  80.00  from holding Liuzhou Chemical Industry or generate 34.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Sanbo Hospital Management  vs.  Liuzhou Chemical Industry

 Performance 
       Timeline  
Sanbo Hospital Management 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Sanbo Hospital Management are ranked lower than 14 (%) 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.
Liuzhou Chemical Industry 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Liuzhou Chemical Industry are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Liuzhou Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Sanbo Hospital and Liuzhou Chemical Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sanbo Hospital and Liuzhou Chemical

The main advantage of trading using opposite Sanbo Hospital and Liuzhou Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sanbo Hospital position performs unexpectedly, Liuzhou Chemical 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 Liuzhou Chemical will offset losses from the drop in Liuzhou Chemical's long position.
The idea behind Sanbo Hospital Management and Liuzhou Chemical Industry 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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