Correlation Between Hunan Tyen and GKHT Medical

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

By analyzing existing cross correlation between Hunan Tyen Machinery and GKHT Medical Technology, you can compare the effects of market volatilities on Hunan Tyen and GKHT Medical 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 Hunan Tyen with a short position of GKHT Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan Tyen and GKHT Medical.

Diversification Opportunities for Hunan Tyen and GKHT Medical

0.8

Correlation Coefficient

Hunan Tyen  GKHT Medical

Very poor diversification

The 3 months correlation between Hunan and GKHT is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Tyen Machinery and GKHT Medical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GKHT Medical Technology and Hunan Tyen 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 Hunan Tyen Machinery are associated (or correlated) with GKHT Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GKHT Medical Technology has no effect on the direction of Hunan Tyen i.e., Hunan Tyen and GKHT Medical go up and down completely randomly.

Pair Corralation between Hunan Tyen and GKHT Medical

Assuming the 90 days trading horizon Hunan Tyen is expected to generate 1.19 times less return on investment than GKHT Medical. But when comparing it to its historical volatility, Hunan Tyen Machinery is 1.03 times less risky than GKHT Medical. It trades about 0.11 of its potential returns per unit of risk. GKHT Medical Technology is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  907.00  in GKHT Medical Technology on September 21, 2024 and sell it today you would earn a total of  259.00  from holding GKHT Medical Technology or generate 28.56% return on investment over 90 days.

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

Hunan Tyen Machinery  vs.  GKHT Medical Technology

Hunan Tyen Machinery

Risk-Adjusted Performance

8 of 100

OK

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

GKHT Medical Technology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GKHT Medical Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GKHT Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hunan Tyen and GKHT Medical

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

The idea behind Hunan Tyen Machinery and GKHT Medical Technology 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.