Correlation Between Sanbo Hospital and Shandong Homey

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

Diversification Opportunities for Sanbo Hospital and Shandong Homey

0.27

Correlation Coefficient

Sanbo Hospital  Shandong Homey

Modest diversification

The 3 months correlation between Sanbo and Shandong is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Sanbo Hospital Management and Shandong Homey Aquatic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Homey Aquatic 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 Shandong Homey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Homey Aquatic has no effect on the direction of Sanbo Hospital i.e., Sanbo Hospital and Shandong Homey go up and down completely randomly.

Pair Corralation between Sanbo Hospital and Shandong Homey

Assuming the 90 days trading horizon Sanbo Hospital is expected to generate 3.38 times less return on investment than Shandong Homey. But when comparing it to its historical volatility, Sanbo Hospital Management is 1.07 times less risky than Shandong Homey. It trades about 0.01 of its potential returns per unit of risk. Shandong Homey Aquatic is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  236.00  in Shandong Homey Aquatic on December 26, 2024 and sell it today you would earn a total of  7.00  from holding Shandong Homey Aquatic or generate 2.97% return on investment over 90 days.

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

Sanbo Hospital Management  vs.  Shandong Homey Aquatic

Sanbo Hospital Management

Risk-Adjusted Performance

Weak

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

Shandong Homey Aquatic

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Homey Aquatic are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Homey may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sanbo Hospital and Shandong Homey

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

The idea behind Sanbo Hospital Management and Shandong Homey Aquatic 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.