Correlation Between Healthcare and Ye Chiu

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

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

Diversification Opportunities for Healthcare and Ye Chiu

0.79

Correlation Coefficient

Healthcare  Ye Chiu

Poor diversification

The 3 months correlation between Healthcare and 601388 is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Co and Ye Chiu Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ye Chiu Metal 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 Ye Chiu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ye Chiu Metal has no effect on the direction of Healthcare i.e., Healthcare and Ye Chiu go up and down completely randomly.

Pair Corralation between Healthcare and Ye Chiu

Assuming the 90 days trading horizon Healthcare Co is expected to under-perform the Ye Chiu. But the stock apears to be less risky and, when comparing its historical volatility, Healthcare Co is 1.25 times less risky than Ye Chiu. The stock trades about -0.05 of its potential returns per unit of risk. The Ye Chiu Metal is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  227.00  in Ye Chiu Metal on October 22, 2024 and sell it today you would earn a total of  13.00  from holding Ye Chiu Metal or generate 5.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.55%
Values	Daily Returns

Healthcare Co  vs.  Ye Chiu Metal

Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Healthcare Co has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Ye Chiu Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ye Chiu Metal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Ye Chiu 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 Ye Chiu

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

The idea behind Healthcare Co and Ye Chiu Metal 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.