Correlation Between Xinjiang Tianrun and CareRay Digital

Can any of the company-specific risk be diversified away by investing in both Xinjiang Tianrun and CareRay Digital 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 Xinjiang Tianrun and CareRay Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xinjiang Tianrun Dairy and CareRay Digital Medical, you can compare the effects of market volatilities on Xinjiang Tianrun and CareRay Digital 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 Xinjiang Tianrun with a short position of CareRay Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinjiang Tianrun and CareRay Digital.

Diversification Opportunities for Xinjiang Tianrun and CareRay Digital

0.92

Correlation Coefficient

Xinjiang Tianrun  CareRay Digital

Almost no diversification

The 3 months correlation between Xinjiang and CareRay is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Xinjiang Tianrun Dairy and CareRay Digital Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareRay Digital Medical and Xinjiang Tianrun 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 Xinjiang Tianrun Dairy are associated (or correlated) with CareRay Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareRay Digital Medical has no effect on the direction of Xinjiang Tianrun i.e., Xinjiang Tianrun and CareRay Digital go up and down completely randomly.

Pair Corralation between Xinjiang Tianrun and CareRay Digital

Assuming the 90 days trading horizon Xinjiang Tianrun Dairy is expected to generate 0.9 times more return on investment than CareRay Digital. However, Xinjiang Tianrun Dairy is 1.11 times less risky than CareRay Digital. It trades about 0.07 of its potential returns per unit of risk. CareRay Digital Medical is currently generating about 0.05 per unit of risk. If you would invest  791.00  in Xinjiang Tianrun Dairy on September 29, 2024 and sell it today you would earn a total of  168.00  from holding Xinjiang Tianrun Dairy or generate 21.24% return on investment over 90 days.

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

Xinjiang Tianrun Dairy  vs.  CareRay Digital Medical

Xinjiang Tianrun Dairy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Tianrun Dairy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinjiang Tianrun may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CareRay Digital Medical

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CareRay Digital Medical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CareRay Digital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Xinjiang Tianrun and CareRay Digital

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

The idea behind Xinjiang Tianrun Dairy and CareRay Digital Medical 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.