Correlation Between Humanwell Healthcare and Xiandai Investment

Can any of the company-specific risk be diversified away by investing in both Humanwell Healthcare and Xiandai Investment 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 Xiandai Investment 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 Xiandai Investment Co, you can compare the effects of market volatilities on Humanwell Healthcare and Xiandai Investment 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 Xiandai Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Humanwell Healthcare and Xiandai Investment.

Diversification Opportunities for Humanwell Healthcare and Xiandai Investment

0.69

Correlation Coefficient

Humanwell Healthcare  Xiandai Investment

Poor diversification

The 3 months correlation between Humanwell and Xiandai is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Humanwell Healthcare Group and Xiandai Investment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiandai Investment 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 Xiandai Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiandai Investment has no effect on the direction of Humanwell Healthcare i.e., Humanwell Healthcare and Xiandai Investment go up and down completely randomly.

Pair Corralation between Humanwell Healthcare and Xiandai Investment

Assuming the 90 days trading horizon Humanwell Healthcare Group is expected to generate 1.07 times more return on investment than Xiandai Investment. However, Humanwell Healthcare is 1.07 times more volatile than Xiandai Investment Co. It trades about 0.02 of its potential returns per unit of risk. Xiandai Investment Co is currently generating about 0.01 per unit of risk. If you would invest  2,164  in Humanwell Healthcare Group on October 27, 2024 and sell it today you would earn a total of  25.00  from holding Humanwell Healthcare Group or generate 1.16% 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.  Xiandai Investment Co

Humanwell Healthcare

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Humanwell Healthcare Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Humanwell Healthcare is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Xiandai Investment

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Xiandai Investment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Xiandai Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Humanwell Healthcare and Xiandai Investment

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

The idea behind Humanwell Healthcare Group and Xiandai Investment Co 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..