Correlation Between HeBei Jinniu and Lotus Health

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Can any of the company-specific risk be diversified away by investing in both HeBei Jinniu 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 HeBei Jinniu and Lotus Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HeBei Jinniu Chemical and Lotus Health Group, you can compare the effects of market volatilities on HeBei Jinniu 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 HeBei Jinniu with a short position of Lotus Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of HeBei Jinniu and Lotus Health.

Diversification Opportunities for HeBei Jinniu and Lotus Health

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between HeBei and Lotus is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding HeBei Jinniu Chemical 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 HeBei Jinniu 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 HeBei Jinniu Chemical 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 HeBei Jinniu i.e., HeBei Jinniu and Lotus Health go up and down completely randomly.

Pair Corralation between HeBei Jinniu and Lotus Health

Assuming the 90 days trading horizon HeBei Jinniu is expected to generate 3.46 times less return on investment than Lotus Health. But when comparing it to its historical volatility, HeBei Jinniu Chemical is 1.32 times less risky than Lotus Health. It trades about 0.03 of its potential returns per unit of risk. Lotus Health Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  271.00  in Lotus Health Group on September 11, 2024 and sell it today you would earn a total of  297.00  from holding Lotus Health Group or generate 109.59% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

HeBei Jinniu Chemical  vs.  Lotus Health Group

 Performance 
       Timeline  
HeBei Jinniu Chemical 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in HeBei Jinniu Chemical are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HeBei Jinniu sustained solid returns over the last few months and may actually be approaching a breakup point.
Lotus Health Group 

Risk-Adjusted Performance

23 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Lotus Health Group are ranked lower than 23 (%) 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.

HeBei Jinniu and Lotus Health Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HeBei Jinniu and Lotus Health

The main advantage of trading using opposite HeBei Jinniu and Lotus Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HeBei Jinniu 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 HeBei Jinniu Chemical 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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