Correlation Between Humanwell Healthcare and China Enterprise

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

Diversification Opportunities for Humanwell Healthcare and China Enterprise

0.16

Correlation Coefficient

Humanwell Healthcare  China Enterprise

Average diversification

The 3 months correlation between Humanwell and China is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Humanwell Healthcare Group and China Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Enterprise 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 China Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Enterprise has no effect on the direction of Humanwell Healthcare i.e., Humanwell Healthcare and China Enterprise go up and down completely randomly.

Pair Corralation between Humanwell Healthcare and China Enterprise

Assuming the 90 days trading horizon Humanwell Healthcare Group is expected to generate 0.74 times more return on investment than China Enterprise. However, Humanwell Healthcare Group is 1.34 times less risky than China Enterprise. It trades about -0.09 of its potential returns per unit of risk. China Enterprise Co is currently generating about -0.21 per unit of risk. If you would invest  2,326  in Humanwell Healthcare Group on October 8, 2024 and sell it today you would lose (98.00) from holding Humanwell Healthcare Group or give up 4.21% of portfolio value over 90 days.

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

Humanwell Healthcare Group  vs.  China Enterprise Co

Humanwell Healthcare

Risk-Adjusted Performance

0 of 100

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 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.

China Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Enterprise Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Humanwell Healthcare and China Enterprise

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

The idea behind Humanwell Healthcare Group and China Enterprise 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.