Correlation Between Xiamen Bank and Humanwell Healthcare

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

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

Diversification Opportunities for Xiamen Bank and Humanwell Healthcare

0.93

Correlation Coefficient

Xiamen Bank  Humanwell Healthcare

Almost no diversification

The 3 months correlation between Xiamen and Humanwell is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Xiamen Bank Co and Humanwell Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humanwell Healthcare and Xiamen Bank 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 Xiamen Bank Co are associated (or correlated) with Humanwell Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Humanwell Healthcare has no effect on the direction of Xiamen Bank i.e., Xiamen Bank and Humanwell Healthcare go up and down completely randomly.

Pair Corralation between Xiamen Bank and Humanwell Healthcare

Assuming the 90 days trading horizon Xiamen Bank is expected to generate 1.6 times less return on investment than Humanwell Healthcare. But when comparing it to its historical volatility, Xiamen Bank Co is 1.33 times less risky than Humanwell Healthcare. It trades about 0.13 of its potential returns per unit of risk. Humanwell Healthcare Group is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,214  in Humanwell Healthcare Group on September 25, 2024 and sell it today you would earn a total of  139.00  from holding Humanwell Healthcare Group or generate 6.28% return on investment over 90 days.

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

Xiamen Bank Co  vs.  Humanwell Healthcare Group

Xiamen Bank

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xiamen Bank Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiamen Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Humanwell Healthcare

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Humanwell Healthcare Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Humanwell Healthcare sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xiamen Bank and Humanwell Healthcare

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

The idea behind Xiamen Bank Co and Humanwell Healthcare 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..