Correlation Between Ping An and Zhongzhu Medical

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

By analyzing existing cross correlation between Ping An Insurance and Zhongzhu Medical Holdings, you can compare the effects of market volatilities on Ping An and Zhongzhu 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 Ping An with a short position of Zhongzhu Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and Zhongzhu Medical.

Diversification Opportunities for Ping An and Zhongzhu Medical

0.29

Correlation Coefficient

Ping An  Zhongzhu Medical

Modest diversification

The 3 months correlation between Ping and Zhongzhu is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and Zhongzhu Medical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongzhu Medical Holdings and Ping An 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 Ping An Insurance are associated (or correlated) with Zhongzhu Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongzhu Medical Holdings has no effect on the direction of Ping An i.e., Ping An and Zhongzhu Medical go up and down completely randomly.

Pair Corralation between Ping An and Zhongzhu Medical

Assuming the 90 days trading horizon Ping An Insurance is expected to generate 1.17 times more return on investment than Zhongzhu Medical. However, Ping An is 1.17 times more volatile than Zhongzhu Medical Holdings. It trades about 0.13 of its potential returns per unit of risk. Zhongzhu Medical Holdings is currently generating about 0.15 per unit of risk. If you would invest  4,370  in Ping An Insurance on September 15, 2024 and sell it today you would earn a total of  1,004  from holding Ping An Insurance or generate 22.97% return on investment over 90 days.

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

Ping An Insurance  vs.  Zhongzhu Medical Holdings

Ping An Insurance

Risk-Adjusted Performance

10 of 100

OK

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

Zhongzhu Medical Holdings

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Ping An and Zhongzhu Medical

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

The idea behind Ping An Insurance and Zhongzhu Medical Holdings 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.