Correlation Between Hangzhou Minsheng and Zhengzhou Qianweiyangchu

Can any of the company-specific risk be diversified away by investing in both Hangzhou Minsheng and Zhengzhou Qianweiyangchu 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 Hangzhou Minsheng and Zhengzhou Qianweiyangchu into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hangzhou Minsheng Healthcare and Zhengzhou Qianweiyangchu Food, you can compare the effects of market volatilities on Hangzhou Minsheng and Zhengzhou Qianweiyangchu 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 Hangzhou Minsheng with a short position of Zhengzhou Qianweiyangchu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hangzhou Minsheng and Zhengzhou Qianweiyangchu.

Diversification Opportunities for Hangzhou Minsheng and Zhengzhou Qianweiyangchu

0.75

Correlation Coefficient

Hangzhou Minsheng  Zhengzhou Qianweiyangchu

Poor diversification

The 3 months correlation between Hangzhou and Zhengzhou is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Hangzhou Minsheng Healthcare and Zhengzhou Qianweiyangchu Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhengzhou Qianweiyangchu and Hangzhou Minsheng 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 Hangzhou Minsheng Healthcare are associated (or correlated) with Zhengzhou Qianweiyangchu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhengzhou Qianweiyangchu has no effect on the direction of Hangzhou Minsheng i.e., Hangzhou Minsheng and Zhengzhou Qianweiyangchu go up and down completely randomly.

Pair Corralation between Hangzhou Minsheng and Zhengzhou Qianweiyangchu

Assuming the 90 days trading horizon Hangzhou Minsheng Healthcare is expected to under-perform the Zhengzhou Qianweiyangchu. But the stock apears to be less risky and, when comparing its historical volatility, Hangzhou Minsheng Healthcare is 1.64 times less risky than Zhengzhou Qianweiyangchu. The stock trades about -0.08 of its potential returns per unit of risk. The Zhengzhou Qianweiyangchu Food is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,843  in Zhengzhou Qianweiyangchu Food on October 22, 2024 and sell it today you would lose (45.00) from holding Zhengzhou Qianweiyangchu Food or give up 1.58% of portfolio value over 90 days.

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

Hangzhou Minsheng Healthcare  vs.  Zhengzhou Qianweiyangchu Food

Hangzhou Minsheng

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hangzhou Minsheng Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Zhengzhou Qianweiyangchu

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Hangzhou Minsheng and Zhengzhou Qianweiyangchu

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

The idea behind Hangzhou Minsheng Healthcare and Zhengzhou Qianweiyangchu Food 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.