Correlation Between Ping An and CareRay Digital

Can any of the company-specific risk be diversified away by investing in both Ping An and CareRay Digital 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 CareRay Digital 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 CareRay Digital Medical, you can compare the effects of market volatilities on Ping An and CareRay Digital 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 CareRay Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and CareRay Digital.

Diversification Opportunities for Ping An and CareRay Digital

0.55

Correlation Coefficient

Ping An  CareRay Digital

Very weak diversification

The 3 months correlation between Ping and CareRay is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and CareRay Digital Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareRay Digital Medical 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 CareRay Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareRay Digital Medical has no effect on the direction of Ping An i.e., Ping An and CareRay Digital go up and down completely randomly.

Pair Corralation between Ping An and CareRay Digital

Assuming the 90 days trading horizon Ping An Insurance is expected to under-perform the CareRay Digital. But the stock apears to be less risky and, when comparing its historical volatility, Ping An Insurance is 1.6 times less risky than CareRay Digital. The stock trades about -0.08 of its potential returns per unit of risk. The CareRay Digital Medical is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,570  in CareRay Digital Medical on December 2, 2024 and sell it today you would earn a total of  8.00  from holding CareRay Digital Medical or generate 0.51% return on investment over 90 days.

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

Ping An Insurance  vs.  CareRay Digital Medical

Ping An Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ping An Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

CareRay Digital Medical

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CareRay Digital Medical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CareRay Digital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ping An and CareRay Digital

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

The idea behind Ping An Insurance and CareRay Digital Medical 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .