Correlation Between Humanwell Healthcare and Bank of China

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

Diversification Opportunities for Humanwell Healthcare and Bank of China

0.55

Correlation Coefficient

Humanwell Healthcare  Bank of China

Very weak diversification

The 3 months correlation between Humanwell and Bank is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Humanwell Healthcare Group and Bank of China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of China 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 Bank of China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of China has no effect on the direction of Humanwell Healthcare i.e., Humanwell Healthcare and Bank of China go up and down completely randomly.

Pair Corralation between Humanwell Healthcare and Bank of China

Assuming the 90 days trading horizon Humanwell Healthcare is expected to generate 16.85 times less return on investment than Bank of China. In addition to that, Humanwell Healthcare is 1.81 times more volatile than Bank of China. It trades about 0.0 of its total potential returns per unit of risk. Bank of China is currently generating about 0.1 per unit of volatility. If you would invest  497.00  in Bank of China on October 6, 2024 and sell it today you would earn a total of  38.00  from holding Bank of China or generate 7.65% return on investment over 90 days.

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

Humanwell Healthcare Group  vs.  Bank of China

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.

Bank of China

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of China are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bank of China may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Humanwell Healthcare and Bank of China

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

The idea behind Humanwell Healthcare Group and Bank of China 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.