Correlation Between Agricultural Bank and Huaxia Eye

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

By analyzing existing cross correlation between Agricultural Bank of and Huaxia Eye Hospital, you can compare the effects of market volatilities on Agricultural Bank and Huaxia Eye 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 Agricultural Bank with a short position of Huaxia Eye. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agricultural Bank and Huaxia Eye.

Diversification Opportunities for Agricultural Bank and Huaxia Eye

0.27

Correlation Coefficient

Agricultural Bank  Huaxia Eye

Modest diversification

The 3 months correlation between Agricultural and Huaxia is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Agricultural Bank of and Huaxia Eye Hospital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaxia Eye Hospital and Agricultural 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 Agricultural Bank of are associated (or correlated) with Huaxia Eye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaxia Eye Hospital has no effect on the direction of Agricultural Bank i.e., Agricultural Bank and Huaxia Eye go up and down completely randomly.

Pair Corralation between Agricultural Bank and Huaxia Eye

Assuming the 90 days trading horizon Agricultural Bank of is expected to under-perform the Huaxia Eye. But the stock apears to be less risky and, when comparing its historical volatility, Agricultural Bank of is 1.87 times less risky than Huaxia Eye. The stock trades about -0.07 of its potential returns per unit of risk. The Huaxia Eye Hospital is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,979  in Huaxia Eye Hospital on December 29, 2024 and sell it today you would earn a total of  81.00  from holding Huaxia Eye Hospital or generate 4.09% return on investment over 90 days.

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

Agricultural Bank of  vs.  Huaxia Eye Hospital

Agricultural Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Agricultural Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Agricultural Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Huaxia Eye Hospital

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Huaxia Eye Hospital are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Huaxia Eye is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Agricultural Bank and Huaxia Eye

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

The idea behind Agricultural Bank of and Huaxia Eye Hospital 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.