Correlation Between Dongnan Electronics and Mingchen Health

Can any of the company-specific risk be diversified away by investing in both Dongnan Electronics and Mingchen Health 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 Dongnan Electronics and Mingchen Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Dongnan Electronics and Mingchen Health

0.38

Correlation Coefficient

Dongnan Electronics  Mingchen Health

Weak diversification

The 3 months correlation between Dongnan and Mingchen is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Dongnan Electronics Co and Mingchen Health Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mingchen Health and Dongnan Electronics 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 Dongnan Electronics Co are associated (or correlated) with Mingchen Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mingchen Health has no effect on the direction of Dongnan Electronics i.e., Dongnan Electronics and Mingchen Health go up and down completely randomly.

Pair Corralation between Dongnan Electronics and Mingchen Health

Assuming the 90 days trading horizon Dongnan Electronics Co is expected to under-perform the Mingchen Health. But the stock apears to be less risky and, when comparing its historical volatility, Dongnan Electronics Co is 1.56 times less risky than Mingchen Health. The stock trades about -0.04 of its potential returns per unit of risk. The Mingchen Health Co is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,482  in Mingchen Health Co on December 4, 2024 and sell it today you would earn a total of  325.00  from holding Mingchen Health Co or generate 21.93% return on investment over 90 days.

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

Dongnan Electronics Co  vs.  Mingchen Health Co

Dongnan Electronics

Risk-Adjusted Performance

Very Weak

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

Mingchen Health

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mingchen Health Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mingchen Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dongnan Electronics and Mingchen Health

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

The idea behind Dongnan Electronics Co and Mingchen Health 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.