Correlation Between Zhejiang Daily and Healthcare

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

By analyzing existing cross correlation between Zhejiang Daily Media and Healthcare Co, you can compare the effects of market volatilities on Zhejiang Daily and Healthcare 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 Zhejiang Daily with a short position of Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Daily and Healthcare.

Diversification Opportunities for Zhejiang Daily and Healthcare

-0.25

Correlation Coefficient

Zhejiang Daily  Healthcare

Very good diversification

The 3 months correlation between Zhejiang and Healthcare is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Daily Media and Healthcare Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare and Zhejiang Daily 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 Zhejiang Daily Media are associated (or correlated) with Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare has no effect on the direction of Zhejiang Daily i.e., Zhejiang Daily and Healthcare go up and down completely randomly.

Pair Corralation between Zhejiang Daily and Healthcare

Assuming the 90 days trading horizon Zhejiang Daily Media is expected to generate 2.08 times more return on investment than Healthcare. However, Zhejiang Daily is 2.08 times more volatile than Healthcare Co. It trades about 0.11 of its potential returns per unit of risk. Healthcare Co is currently generating about -0.12 per unit of risk. If you would invest  1,114  in Zhejiang Daily Media on December 2, 2024 and sell it today you would earn a total of  308.00  from holding Zhejiang Daily Media or generate 27.65% return on investment over 90 days.

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

Zhejiang Daily Media  vs.  Healthcare Co

Zhejiang Daily Media

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Daily Media are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Daily sustained solid returns over the last few months and may actually be approaching a breakup point.

Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Healthcare 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Zhejiang Daily and Healthcare

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

The idea behind Zhejiang Daily Media and Healthcare 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.