Correlation Between Zhejiang Xiantong and Healthcare

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

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

Diversification Opportunities for Zhejiang Xiantong and Healthcare

0.83

Correlation Coefficient

Zhejiang Xiantong  Healthcare

Very poor diversification

The 3 months correlation between Zhejiang and Healthcare is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Xiantong RubberPlasti and Healthcare Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare and Zhejiang Xiantong 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 Zhejiang Xiantong RubberPlastic are associated (or correlated) with Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare has no effect on the direction of Zhejiang Xiantong i.e., Zhejiang Xiantong and Healthcare go up and down completely randomly.

Pair Corralation between Zhejiang Xiantong and Healthcare

Assuming the 90 days trading horizon Zhejiang Xiantong RubberPlastic is expected to generate 1.08 times more return on investment than Healthcare. However, Zhejiang Xiantong is 1.08 times more volatile than Healthcare Co. It trades about 0.16 of its potential returns per unit of risk. Healthcare Co is currently generating about 0.15 per unit of risk. If you would invest  1,300  in Zhejiang Xiantong RubberPlastic on September 21, 2024 and sell it today you would earn a total of  119.00  from holding Zhejiang Xiantong RubberPlastic or generate 9.15% return on investment over 90 days.

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

Zhejiang Xiantong RubberPlasti  vs.  Healthcare Co

Zhejiang Xiantong

Risk-Adjusted Performance

10 of 100

OK

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

Healthcare

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Healthcare Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Healthcare sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhejiang Xiantong and Healthcare

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

The idea behind Zhejiang Xiantong RubberPlastic and 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.