Correlation Between Healthcare and Xian International

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

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

Diversification Opportunities for Healthcare and Xian International

0.81

Correlation Coefficient

Healthcare  Xian International

Very poor diversification

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

Pair Corralation between Healthcare and Xian International

Assuming the 90 days trading horizon Healthcare Co is expected to generate 1.39 times more return on investment than Xian International. However, Healthcare is 1.39 times more volatile than Xian International Medical. It trades about -0.2 of its potential returns per unit of risk. Xian International Medical is currently generating about -0.42 per unit of risk. If you would invest  746.00  in Healthcare Co on October 11, 2024 and sell it today you would lose (91.00) from holding Healthcare Co or give up 12.2% of portfolio value over 90 days.

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

Healthcare Co  vs.  Xian International Medical

Healthcare

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Healthcare Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Healthcare is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Xian International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Healthcare and Xian International

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

The idea behind Healthcare Co and Xian International Medical 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 Global Correlations module to find global opportunities by holding instruments from different markets.