Correlation Between Hunan Oil and Innovative Medical

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

By analyzing existing cross correlation between Hunan Oil Pump and Innovative Medical Management, you can compare the effects of market volatilities on Hunan Oil and Innovative Medical 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 Hunan Oil with a short position of Innovative Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan Oil and Innovative Medical.

Diversification Opportunities for Hunan Oil and Innovative Medical

0.77

Correlation Coefficient

Hunan Oil  Innovative Medical

Poor diversification

The 3 months correlation between Hunan and Innovative is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Oil Pump and Innovative Medical Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovative Medical and Hunan Oil 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 Hunan Oil Pump are associated (or correlated) with Innovative Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovative Medical has no effect on the direction of Hunan Oil i.e., Hunan Oil and Innovative Medical go up and down completely randomly.

Pair Corralation between Hunan Oil and Innovative Medical

Assuming the 90 days trading horizon Hunan Oil Pump is expected to generate 1.13 times more return on investment than Innovative Medical. However, Hunan Oil is 1.13 times more volatile than Innovative Medical Management. It trades about 0.18 of its potential returns per unit of risk. Innovative Medical Management is currently generating about 0.04 per unit of risk. If you would invest  2,125  in Hunan Oil Pump on December 27, 2024 and sell it today you would earn a total of  1,259  from holding Hunan Oil Pump or generate 59.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

Hunan Oil Pump  vs.  Innovative Medical Management

Hunan Oil Pump

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Oil Pump are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Oil sustained solid returns over the last few months and may actually be approaching a breakup point.

Innovative Medical

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Hunan Oil and Innovative Medical

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

The idea behind Hunan Oil Pump and Innovative Medical Management 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.