Correlation Between Sanbo Hospital and China Publishing

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

Diversification Opportunities for Sanbo Hospital and China Publishing

0.46

Correlation Coefficient

Sanbo Hospital  China Publishing

Very weak diversification

The 3 months correlation between Sanbo and China is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Sanbo Hospital Management and China Publishing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Publishing Media 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 China Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Publishing Media has no effect on the direction of Sanbo Hospital i.e., Sanbo Hospital and China Publishing go up and down completely randomly.

Pair Corralation between Sanbo Hospital and China Publishing

Assuming the 90 days trading horizon Sanbo Hospital Management is expected to generate 1.3 times more return on investment than China Publishing. However, Sanbo Hospital is 1.3 times more volatile than China Publishing Media. It trades about -0.14 of its potential returns per unit of risk. China Publishing Media is currently generating about -0.3 per unit of risk. If you would invest  4,739  in Sanbo Hospital Management on October 22, 2024 and sell it today you would lose (346.00) from holding Sanbo Hospital Management or give up 7.3% of portfolio value over 90 days.

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

Sanbo Hospital Management  vs.  China Publishing Media

Sanbo Hospital Management

Risk-Adjusted Performance

0 of 100

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.

China Publishing Media

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days China Publishing Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Publishing 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 China Publishing

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

The idea behind Sanbo Hospital Management and China Publishing Media 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.