Correlation Between Ming Yang and Mingchen Health

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

By analyzing existing cross correlation between Ming Yang Smart and Mingchen Health Co, you can compare the effects of market volatilities on Ming Yang and Mingchen Health 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 Ming Yang with a short position of Mingchen Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ming Yang and Mingchen Health.

Diversification Opportunities for Ming Yang and Mingchen Health

0.38

Correlation Coefficient

Ming Yang  Mingchen Health

Weak diversification

The 3 months correlation between Ming and Mingchen is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ming Yang Smart and Mingchen Health Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mingchen Health and Ming Yang 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 Ming Yang Smart are associated (or correlated) with Mingchen Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mingchen Health has no effect on the direction of Ming Yang i.e., Ming Yang and Mingchen Health go up and down completely randomly.

Pair Corralation between Ming Yang and Mingchen Health

Assuming the 90 days trading horizon Ming Yang Smart is expected to under-perform the Mingchen Health. But the stock apears to be less risky and, when comparing its historical volatility, Ming Yang Smart is 1.36 times less risky than Mingchen Health. The stock trades about -0.03 of its potential returns per unit of risk. The Mingchen Health Co is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,390  in Mingchen Health Co on October 24, 2024 and sell it today you would earn a total of  346.00  from holding Mingchen Health Co or generate 24.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Ming Yang Smart  vs.  Mingchen Health Co

Ming Yang Smart

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mingchen Health

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mingchen Health Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mingchen Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ming Yang and Mingchen Health

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

The idea behind Ming Yang Smart and Mingchen Health 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.