Correlation Between Healthcare and ChengDu Hi

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

By analyzing existing cross correlation between Healthcare Co and ChengDu Hi Tech Development, you can compare the effects of market volatilities on Healthcare and ChengDu Hi 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 ChengDu Hi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Healthcare and ChengDu Hi.

Diversification Opportunities for Healthcare and ChengDu Hi

0.76

Correlation Coefficient

Healthcare  ChengDu Hi

Poor diversification

The 3 months correlation between Healthcare and ChengDu is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Co and ChengDu Hi Tech Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChengDu Hi Tech 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 ChengDu Hi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChengDu Hi Tech has no effect on the direction of Healthcare i.e., Healthcare and ChengDu Hi go up and down completely randomly.

Pair Corralation between Healthcare and ChengDu Hi

Assuming the 90 days trading horizon Healthcare Co is expected to generate 0.63 times more return on investment than ChengDu Hi. However, Healthcare Co is 1.58 times less risky than ChengDu Hi. It trades about -0.11 of its potential returns per unit of risk. ChengDu Hi Tech Development is currently generating about -0.15 per unit of risk. If you would invest  716.00  in Healthcare Co on December 27, 2024 and sell it today you would lose (87.00) from holding Healthcare Co or give up 12.15% of portfolio value over 90 days.

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

Healthcare Co  vs.  ChengDu Hi Tech Development

Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Healthcare Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

ChengDu Hi Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days ChengDu Hi Tech Development has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Healthcare and ChengDu Hi

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

The idea behind Healthcare Co and ChengDu Hi Tech Development 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.