Correlation Between Shanghai Putailai and Zhende Medical

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

By analyzing existing cross correlation between Shanghai Putailai New and Zhende Medical Co, you can compare the effects of market volatilities on Shanghai Putailai and Zhende 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 Shanghai Putailai with a short position of Zhende Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Putailai and Zhende Medical.

Diversification Opportunities for Shanghai Putailai and Zhende Medical

0.73

Correlation Coefficient

Shanghai Putailai  Zhende Medical

Poor diversification

The 3 months correlation between Shanghai and Zhende is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Putailai New and Zhende Medical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhende Medical and Shanghai Putailai 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 Shanghai Putailai New are associated (or correlated) with Zhende Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhende Medical has no effect on the direction of Shanghai Putailai i.e., Shanghai Putailai and Zhende Medical go up and down completely randomly.

Pair Corralation between Shanghai Putailai and Zhende Medical

Assuming the 90 days trading horizon Shanghai Putailai New is expected to under-perform the Zhende Medical. In addition to that, Shanghai Putailai is 1.82 times more volatile than Zhende Medical Co. It trades about -0.5 of its total potential returns per unit of risk. Zhende Medical Co is currently generating about -0.74 per unit of volatility. If you would invest  2,391  in Zhende Medical Co on October 13, 2024 and sell it today you would lose (354.00) from holding Zhende Medical Co or give up 14.81% of portfolio value over 90 days.

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

Shanghai Putailai New  vs.  Zhende Medical Co

Shanghai Putailai New

Risk-Adjusted Performance

3 of 100

Insignificant

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

Zhende Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhende Medical Co 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 Shanghai Putailai and Zhende Medical

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

The idea behind Shanghai Putailai New and Zhende Medical Co 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..