Correlation Between Zhende Medical and AVCON Information

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

By analyzing existing cross correlation between Zhende Medical Co and AVCON Information Tech, you can compare the effects of market volatilities on Zhende Medical and AVCON Information 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 Zhende Medical with a short position of AVCON Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhende Medical and AVCON Information.

Diversification Opportunities for Zhende Medical and AVCON Information

0.81

Correlation Coefficient

Zhende Medical  AVCON Information

Very poor diversification

The 3 months correlation between Zhende and AVCON is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Zhende Medical Co and AVCON Information Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVCON Information Tech and Zhende Medical 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 Zhende Medical Co are associated (or correlated) with AVCON Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVCON Information Tech has no effect on the direction of Zhende Medical i.e., Zhende Medical and AVCON Information go up and down completely randomly.

Pair Corralation between Zhende Medical and AVCON Information

Assuming the 90 days trading horizon Zhende Medical is expected to generate 4.2 times less return on investment than AVCON Information. But when comparing it to its historical volatility, Zhende Medical Co is 1.83 times less risky than AVCON Information. It trades about 0.01 of its potential returns per unit of risk. AVCON Information Tech is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  344.00  in AVCON Information Tech on October 13, 2024 and sell it today you would earn a total of  23.00  from holding AVCON Information Tech or generate 6.69% return on investment over 90 days.

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

Zhende Medical Co  vs.  AVCON Information Tech

Zhende Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhende Medical Co 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.

AVCON Information Tech

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Zhende Medical and AVCON Information

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

The idea behind Zhende Medical Co and AVCON Information Tech 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.