Correlation Between Zhejiang Yongjin and Double Medical

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

By analyzing existing cross correlation between Zhejiang Yongjin Metal and Double Medical Technology, you can compare the effects of market volatilities on Zhejiang Yongjin and Double 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 Zhejiang Yongjin with a short position of Double Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Yongjin and Double Medical.

Diversification Opportunities for Zhejiang Yongjin and Double Medical

0.55

Correlation Coefficient

Zhejiang Yongjin  Double Medical

Very weak diversification

The 3 months correlation between Zhejiang and Double is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Yongjin Metal and Double Medical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Double Medical Technology and Zhejiang Yongjin 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 Zhejiang Yongjin Metal are associated (or correlated) with Double Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Double Medical Technology has no effect on the direction of Zhejiang Yongjin i.e., Zhejiang Yongjin and Double Medical go up and down completely randomly.

Pair Corralation between Zhejiang Yongjin and Double Medical

Assuming the 90 days trading horizon Zhejiang Yongjin Metal is expected to under-perform the Double Medical. But the stock apears to be less risky and, when comparing its historical volatility, Zhejiang Yongjin Metal is 1.13 times less risky than Double Medical. The stock trades about -0.04 of its potential returns per unit of risk. The Double Medical Technology is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,720  in Double Medical Technology on October 24, 2024 and sell it today you would lose (120.00) from holding Double Medical Technology or give up 3.23% of portfolio value over 90 days.

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

Zhejiang Yongjin Metal  vs.  Double Medical Technology

Zhejiang Yongjin Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Yongjin Metal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Zhejiang Yongjin is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Double Medical Technology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Double Medical Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Double Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Zhejiang Yongjin and Double Medical

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

The idea behind Zhejiang Yongjin Metal and Double Medical 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.