Correlation Between Mengtian Home and PKU HealthCare

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

By analyzing existing cross correlation between Mengtian Home Group and PKU HealthCare Corp, you can compare the effects of market volatilities on Mengtian Home and PKU 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 Mengtian Home with a short position of PKU HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mengtian Home and PKU HealthCare.

Diversification Opportunities for Mengtian Home and PKU HealthCare

0.48

Correlation Coefficient

Mengtian Home  PKU HealthCare

Very weak diversification

The 3 months correlation between Mengtian and PKU is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Mengtian Home Group and PKU HealthCare Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PKU HealthCare Corp and Mengtian Home 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 Mengtian Home Group are associated (or correlated) with PKU HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PKU HealthCare Corp has no effect on the direction of Mengtian Home i.e., Mengtian Home and PKU HealthCare go up and down completely randomly.

Pair Corralation between Mengtian Home and PKU HealthCare

Assuming the 90 days trading horizon Mengtian Home Group is expected to under-perform the PKU HealthCare. In addition to that, Mengtian Home is 1.05 times more volatile than PKU HealthCare Corp. It trades about 0.0 of its total potential returns per unit of risk. PKU HealthCare Corp is currently generating about 0.01 per unit of volatility. If you would invest  647.00  in PKU HealthCare Corp on October 9, 2024 and sell it today you would lose (22.00) from holding PKU HealthCare Corp or give up 3.4% of portfolio value over 90 days.

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

Mengtian Home Group  vs.  PKU HealthCare Corp

Mengtian Home Group

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mengtian Home Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mengtian Home sustained solid returns over the last few months and may actually be approaching a breakup point.

PKU HealthCare Corp

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PKU HealthCare Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PKU HealthCare may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Mengtian Home and PKU HealthCare

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

The idea behind Mengtian Home Group and PKU HealthCare Corp 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.