Correlation Between Zhongzhu Medical and CareRay Digital

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

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

Diversification Opportunities for Zhongzhu Medical and CareRay Digital

0.89

Correlation Coefficient

Zhongzhu Medical  CareRay Digital

Very poor diversification

The 3 months correlation between Zhongzhu and CareRay is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Zhongzhu Medical Holdings 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 Zhongzhu Medical 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 Zhongzhu Medical Holdings 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 Zhongzhu Medical i.e., Zhongzhu Medical and CareRay Digital go up and down completely randomly.

Pair Corralation between Zhongzhu Medical and CareRay Digital

Assuming the 90 days trading horizon Zhongzhu Medical Holdings is expected to generate 0.99 times more return on investment than CareRay Digital. However, Zhongzhu Medical Holdings is 1.01 times less risky than CareRay Digital. It trades about 0.05 of its potential returns per unit of risk. CareRay Digital Medical is currently generating about 0.02 per unit of risk. If you would invest  124.00  in Zhongzhu Medical Holdings on October 25, 2024 and sell it today you would earn a total of  7.00  from holding Zhongzhu Medical Holdings or generate 5.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Zhongzhu Medical Holdings  vs.  CareRay Digital Medical

Zhongzhu Medical Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongzhu Medical Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongzhu Medical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CareRay Digital Medical

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Zhongzhu Medical and CareRay Digital

The main advantage of trading using opposite Zhongzhu Medical and CareRay Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhongzhu Medical 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 Zhongzhu Medical Holdings 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.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.