Correlation Between CHC Healthcare and Ma Kuang

Can any of the company-specific risk be diversified away by investing in both CHC Healthcare and Ma Kuang 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 CHC Healthcare and Ma Kuang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CHC Healthcare Group and Ma Kuang Healthcare, you can compare the effects of market volatilities on CHC Healthcare and Ma Kuang 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 CHC Healthcare with a short position of Ma Kuang. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHC Healthcare and Ma Kuang.

Diversification Opportunities for CHC Healthcare and Ma Kuang

-0.66

Correlation Coefficient

CHC Healthcare  Ma Kuang

Excellent diversification

The 3 months correlation between CHC and 4139 is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding CHC Healthcare Group and Ma Kuang Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ma Kuang Healthcare and CHC Healthcare 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 CHC Healthcare Group are associated (or correlated) with Ma Kuang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ma Kuang Healthcare has no effect on the direction of CHC Healthcare i.e., CHC Healthcare and Ma Kuang go up and down completely randomly.

Pair Corralation between CHC Healthcare and Ma Kuang

Assuming the 90 days trading horizon CHC Healthcare Group is expected to generate 1.71 times more return on investment than Ma Kuang. However, CHC Healthcare is 1.71 times more volatile than Ma Kuang Healthcare. It trades about 0.19 of its potential returns per unit of risk. Ma Kuang Healthcare is currently generating about -0.06 per unit of risk. If you would invest  4,015  in CHC Healthcare Group on December 20, 2024 and sell it today you would earn a total of  1,135  from holding CHC Healthcare Group or generate 28.27% return on investment over 90 days.

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

CHC Healthcare Group  vs.  Ma Kuang Healthcare

CHC Healthcare Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CHC Healthcare Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CHC Healthcare showed solid returns over the last few months and may actually be approaching a breakup point.

Ma Kuang Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ma Kuang Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Ma Kuang is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with CHC Healthcare and Ma Kuang

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

The idea behind CHC Healthcare Group and Ma Kuang Healthcare 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.