Correlation Between Wuhan Yangtze and Lotus Health

Can any of the company-specific risk be diversified away by investing in both Wuhan Yangtze and Lotus Health 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 Wuhan Yangtze and Lotus Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wuhan Yangtze Communication and Lotus Health Group, you can compare the effects of market volatilities on Wuhan Yangtze and Lotus Health 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 Wuhan Yangtze with a short position of Lotus Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wuhan Yangtze and Lotus Health.

Diversification Opportunities for Wuhan Yangtze and Lotus Health

0.87

Correlation Coefficient

Wuhan Yangtze  Lotus Health

Very poor diversification

The 3 months correlation between Wuhan and Lotus is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Wuhan Yangtze Communication and Lotus Health Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Health Group and Wuhan Yangtze 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 Wuhan Yangtze Communication are associated (or correlated) with Lotus Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Health Group has no effect on the direction of Wuhan Yangtze i.e., Wuhan Yangtze and Lotus Health go up and down completely randomly.

Pair Corralation between Wuhan Yangtze and Lotus Health

Assuming the 90 days trading horizon Wuhan Yangtze Communication is expected to under-perform the Lotus Health. In addition to that, Wuhan Yangtze is 1.46 times more volatile than Lotus Health Group. It trades about -0.11 of its total potential returns per unit of risk. Lotus Health Group is currently generating about 0.11 per unit of volatility. If you would invest  498.00  in Lotus Health Group on September 23, 2024 and sell it today you would earn a total of  31.00  from holding Lotus Health Group or generate 6.22% return on investment over 90 days.

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

Wuhan Yangtze Communication  vs.  Lotus Health Group

Wuhan Yangtze Commun

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wuhan Yangtze Communication are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wuhan Yangtze sustained solid returns over the last few months and may actually be approaching a breakup point.

Lotus Health Group

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lotus Health Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lotus Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wuhan Yangtze and Lotus Health

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

The idea behind Wuhan Yangtze Communication and Lotus Health Group 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.