Correlation Between Wenzhou Kangning and COMPASS MINERALS

Can any of the company-specific risk be diversified away by investing in both Wenzhou Kangning and COMPASS MINERALS 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 Wenzhou Kangning and COMPASS MINERALS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wenzhou Kangning Hospital and COMPASS MINERALS, you can compare the effects of market volatilities on Wenzhou Kangning and COMPASS MINERALS 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 Wenzhou Kangning with a short position of COMPASS MINERALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wenzhou Kangning and COMPASS MINERALS.

Diversification Opportunities for Wenzhou Kangning and COMPASS MINERALS

0.65

Correlation Coefficient

Wenzhou Kangning  COMPASS MINERALS

Poor diversification

The 3 months correlation between Wenzhou and COMPASS is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Wenzhou Kangning Hospital and COMPASS MINERALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMPASS MINERALS and Wenzhou Kangning 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 Wenzhou Kangning Hospital are associated (or correlated) with COMPASS MINERALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMPASS MINERALS has no effect on the direction of Wenzhou Kangning i.e., Wenzhou Kangning and COMPASS MINERALS go up and down completely randomly.

Pair Corralation between Wenzhou Kangning and COMPASS MINERALS

Assuming the 90 days trading horizon Wenzhou Kangning Hospital is expected to under-perform the COMPASS MINERALS. But the stock apears to be less risky and, when comparing its historical volatility, Wenzhou Kangning Hospital is 1.26 times less risky than COMPASS MINERALS. The stock trades about -0.24 of its potential returns per unit of risk. The COMPASS MINERALS is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,000.00  in COMPASS MINERALS on December 23, 2024 and sell it today you would lose (55.00) from holding COMPASS MINERALS or give up 5.5% of portfolio value over 90 days.

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

Wenzhou Kangning Hospital  vs.  COMPASS MINERALS

Wenzhou Kangning Hospital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wenzhou Kangning Hospital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

COMPASS MINERALS

Risk-Adjusted Performance

Very Weak

Over the last 90 days COMPASS MINERALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, COMPASS MINERALS is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Wenzhou Kangning and COMPASS MINERALS

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

The idea behind Wenzhou Kangning Hospital and COMPASS MINERALS 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.