Correlation Between Cheng Mei and Healthconn Corp

Can any of the company-specific risk be diversified away by investing in both Cheng Mei and Healthconn Corp 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 Cheng Mei and Healthconn Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cheng Mei Materials and Healthconn Corp, you can compare the effects of market volatilities on Cheng Mei and Healthconn Corp 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 Cheng Mei with a short position of Healthconn Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheng Mei and Healthconn Corp.

Diversification Opportunities for Cheng Mei and Healthconn Corp

0.51

Correlation Coefficient

Cheng Mei  Healthconn Corp

Very weak diversification

The 3 months correlation between Cheng and Healthconn is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Cheng Mei Materials and Healthconn Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthconn Corp and Cheng Mei 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 Cheng Mei Materials are associated (or correlated) with Healthconn Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthconn Corp has no effect on the direction of Cheng Mei i.e., Cheng Mei and Healthconn Corp go up and down completely randomly.

Pair Corralation between Cheng Mei and Healthconn Corp

Assuming the 90 days trading horizon Cheng Mei is expected to generate 2.31 times less return on investment than Healthconn Corp. But when comparing it to its historical volatility, Cheng Mei Materials is 3.49 times less risky than Healthconn Corp. It trades about 0.12 of its potential returns per unit of risk. Healthconn Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,895  in Healthconn Corp on December 23, 2024 and sell it today you would earn a total of  265.00  from holding Healthconn Corp or generate 13.98% return on investment over 90 days.

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

Cheng Mei Materials  vs.  Healthconn Corp

Cheng Mei Materials

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cheng Mei Materials are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Cheng Mei may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Healthconn Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Healthconn Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Healthconn Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cheng Mei and Healthconn Corp

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

The idea behind Cheng Mei Materials and Healthconn Corp 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.