Correlation Between Hunan Oil and CareRay Digital

Can any of the company-specific risk be diversified away by investing in both Hunan Oil and CareRay Digital 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 CareRay Digital 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 CareRay Digital Medical, you can compare the effects of market volatilities on Hunan Oil and CareRay Digital 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 CareRay Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan Oil and CareRay Digital.

Diversification Opportunities for Hunan Oil and CareRay Digital

0.85

Correlation Coefficient

Hunan Oil  CareRay Digital

Very poor diversification

The 3 months correlation between Hunan and CareRay is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Oil Pump and CareRay Digital Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareRay Digital 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 CareRay Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareRay Digital Medical has no effect on the direction of Hunan Oil i.e., Hunan Oil and CareRay Digital go up and down completely randomly.

Pair Corralation between Hunan Oil and CareRay Digital

Assuming the 90 days trading horizon Hunan Oil Pump is expected to generate 1.41 times more return on investment than CareRay Digital. However, Hunan Oil is 1.41 times more volatile than CareRay Digital Medical. It trades about 0.03 of its potential returns per unit of risk. CareRay Digital Medical is currently generating about -0.05 per unit of risk. If you would invest  1,875  in Hunan Oil Pump on October 8, 2024 and sell it today you would earn a total of  70.00  from holding Hunan Oil Pump or generate 3.73% return on investment over 90 days.

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

Hunan Oil Pump  vs.  CareRay Digital Medical

Hunan Oil Pump

Risk-Adjusted Performance

2 of 100

Weak

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

CareRay Digital Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CareRay Digital Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Hunan Oil and CareRay Digital

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

The idea behind Hunan Oil Pump and CareRay Digital 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.