Correlation Between Industrial and Dezhan HealthCare

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

By analyzing existing cross correlation between Industrial and Commercial and Dezhan HealthCare Co, you can compare the effects of market volatilities on Industrial and Dezhan 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 Industrial with a short position of Dezhan HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and Dezhan HealthCare.

Diversification Opportunities for Industrial and Dezhan HealthCare

0.27

Correlation Coefficient

Industrial  Dezhan HealthCare

Modest diversification

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

Pair Corralation between Industrial and Dezhan HealthCare

Assuming the 90 days trading horizon Industrial is expected to generate 3.47 times less return on investment than Dezhan HealthCare. But when comparing it to its historical volatility, Industrial and Commercial is 2.03 times less risky than Dezhan HealthCare. It trades about 0.1 of its potential returns per unit of risk. Dezhan HealthCare Co is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  247.00  in Dezhan HealthCare Co on September 4, 2024 and sell it today you would earn a total of  82.00  from holding Dezhan HealthCare Co or generate 33.2% return on investment over 90 days.

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

Industrial and Commercial  vs.  Dezhan HealthCare Co

Industrial and Commercial

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dezhan HealthCare

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dezhan HealthCare Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dezhan HealthCare sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial and Dezhan HealthCare

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

The idea behind Industrial and Commercial and Dezhan HealthCare Co 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 Transaction History module to view history of all your transactions and understand their impact on performance.