Correlation Between Humanwell Healthcare and Guangzhou Dongfang

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

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

Diversification Opportunities for Humanwell Healthcare and Guangzhou Dongfang

0.71

Correlation Coefficient

Humanwell Healthcare  Guangzhou Dongfang

Poor diversification

The 3 months correlation between Humanwell and Guangzhou is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Humanwell Healthcare Group and Guangzhou Dongfang Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Dongfang Hotel and Humanwell 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 Humanwell Healthcare Group are associated (or correlated) with Guangzhou Dongfang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Dongfang Hotel has no effect on the direction of Humanwell Healthcare i.e., Humanwell Healthcare and Guangzhou Dongfang go up and down completely randomly.

Pair Corralation between Humanwell Healthcare and Guangzhou Dongfang

Assuming the 90 days trading horizon Humanwell Healthcare Group is expected to under-perform the Guangzhou Dongfang. In addition to that, Humanwell Healthcare is 1.48 times more volatile than Guangzhou Dongfang Hotel. It trades about -0.12 of its total potential returns per unit of risk. Guangzhou Dongfang Hotel is currently generating about 0.07 per unit of volatility. If you would invest  948.00  in Guangzhou Dongfang Hotel on December 2, 2024 and sell it today you would earn a total of  17.00  from holding Guangzhou Dongfang Hotel or generate 1.79% return on investment over 90 days.

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

Humanwell Healthcare Group  vs.  Guangzhou Dongfang Hotel

Humanwell Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Humanwell Healthcare Group 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.

Guangzhou Dongfang Hotel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangzhou Dongfang Hotel 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.

Pair Trading with Humanwell Healthcare and Guangzhou Dongfang

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

The idea behind Humanwell Healthcare Group and Guangzhou Dongfang Hotel 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 Commodity Directory module to find actively traded commodities issued by global exchanges.