Correlation Between GKHT Medical and Beijing Wandong

Can any of the company-specific risk be diversified away by investing in both GKHT Medical and Beijing Wandong 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 GKHT Medical and Beijing Wandong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GKHT Medical Technology and Beijing Wandong Medical, you can compare the effects of market volatilities on GKHT Medical and Beijing Wandong 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 GKHT Medical with a short position of Beijing Wandong. Check out your portfolio center. Please also check ongoing floating volatility patterns of GKHT Medical and Beijing Wandong.

Diversification Opportunities for GKHT Medical and Beijing Wandong

0.53

Correlation Coefficient

GKHT Medical  Beijing Wandong

Very weak diversification

The 3 months correlation between GKHT and Beijing is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding GKHT Medical Technology and Beijing Wandong Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Wandong Medical and GKHT Medical 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 GKHT Medical Technology are associated (or correlated) with Beijing Wandong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Wandong Medical has no effect on the direction of GKHT Medical i.e., GKHT Medical and Beijing Wandong go up and down completely randomly.

Pair Corralation between GKHT Medical and Beijing Wandong

Assuming the 90 days trading horizon GKHT Medical Technology is expected to under-perform the Beijing Wandong. In addition to that, GKHT Medical is 1.68 times more volatile than Beijing Wandong Medical. It trades about -0.05 of its total potential returns per unit of risk. Beijing Wandong Medical is currently generating about -0.02 per unit of volatility. If you would invest  2,010  in Beijing Wandong Medical on October 4, 2024 and sell it today you would lose (500.00) from holding Beijing Wandong Medical or give up 24.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	75.47%
Values	Daily Returns

GKHT Medical Technology  vs.  Beijing Wandong Medical

GKHT Medical Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GKHT Medical Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Beijing Wandong Medical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with GKHT Medical and Beijing Wandong

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

The idea behind GKHT Medical Technology and Beijing Wandong 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.