Correlation Between Healthcare and Qiming Information

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

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

Diversification Opportunities for Healthcare and Qiming Information

0.75

Correlation Coefficient

Healthcare  Qiming Information

Poor diversification

The 3 months correlation between Healthcare and Qiming is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Co and Qiming Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qiming Information 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 Qiming Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qiming Information has no effect on the direction of Healthcare i.e., Healthcare and Qiming Information go up and down completely randomly.

Pair Corralation between Healthcare and Qiming Information

Assuming the 90 days trading horizon Healthcare Co is expected to under-perform the Qiming Information. But the stock apears to be less risky and, when comparing its historical volatility, Healthcare Co is 1.38 times less risky than Qiming Information. The stock trades about -0.02 of its potential returns per unit of risk. The Qiming Information Technology is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,000  in Qiming Information Technology on September 27, 2024 and sell it today you would lose (13.00) from holding Qiming Information Technology or give up 0.65% 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.  Qiming Information Technology

Healthcare

Risk-Adjusted Performance

3 of 100

Insignificant

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

Qiming Information

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Qiming Information Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qiming Information may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Healthcare and Qiming Information

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

The idea behind Healthcare Co and Qiming Information Technology 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.