Correlation Between Zhongsheng Group and OBSERVE MEDICAL

Can any of the company-specific risk be diversified away by investing in both Zhongsheng Group and OBSERVE MEDICAL 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 Zhongsheng Group and OBSERVE MEDICAL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhongsheng Group Holdings and OBSERVE MEDICAL ASA, you can compare the effects of market volatilities on Zhongsheng Group and OBSERVE MEDICAL 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 Zhongsheng Group with a short position of OBSERVE MEDICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhongsheng Group and OBSERVE MEDICAL.

Diversification Opportunities for Zhongsheng Group and OBSERVE MEDICAL

0.09

Correlation Coefficient

Zhongsheng Group  OBSERVE MEDICAL

Significant diversification

The 3 months correlation between Zhongsheng and OBSERVE is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Zhongsheng Group Holdings and OBSERVE MEDICAL ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OBSERVE MEDICAL ASA and Zhongsheng Group 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 Zhongsheng Group Holdings are associated (or correlated) with OBSERVE MEDICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OBSERVE MEDICAL ASA has no effect on the direction of Zhongsheng Group i.e., Zhongsheng Group and OBSERVE MEDICAL go up and down completely randomly.

Pair Corralation between Zhongsheng Group and OBSERVE MEDICAL

Assuming the 90 days horizon Zhongsheng Group is expected to generate 1.01 times less return on investment than OBSERVE MEDICAL. In addition to that, Zhongsheng Group is 1.32 times more volatile than OBSERVE MEDICAL ASA. It trades about 0.12 of its total potential returns per unit of risk. OBSERVE MEDICAL ASA is currently generating about 0.16 per unit of volatility. If you would invest  2.28  in OBSERVE MEDICAL ASA on September 26, 2024 and sell it today you would earn a total of  0.68  from holding OBSERVE MEDICAL ASA or generate 29.82% return on investment over 90 days.

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

Zhongsheng Group Holdings  vs.  OBSERVE MEDICAL ASA

Zhongsheng Group Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongsheng Group Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Zhongsheng Group reported solid returns over the last few months and may actually be approaching a breakup point.

OBSERVE MEDICAL ASA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in OBSERVE MEDICAL ASA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, OBSERVE MEDICAL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Zhongsheng Group and OBSERVE MEDICAL

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

The idea behind Zhongsheng Group Holdings and OBSERVE MEDICAL ASA 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.