Correlation Between Heilongjiang Publishing and Lotus Health

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

By analyzing existing cross correlation between Heilongjiang Publishing Media and Lotus Health Group, you can compare the effects of market volatilities on Heilongjiang Publishing and Lotus Health 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 Heilongjiang Publishing with a short position of Lotus Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heilongjiang Publishing and Lotus Health.

Diversification Opportunities for Heilongjiang Publishing and Lotus Health

0.61

Correlation Coefficient

Heilongjiang Publishing  Lotus Health

Poor diversification

The 3 months correlation between Heilongjiang and Lotus is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Heilongjiang Publishing Media and Lotus Health Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Health Group and Heilongjiang Publishing 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 Heilongjiang Publishing Media are associated (or correlated) with Lotus Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Health Group has no effect on the direction of Heilongjiang Publishing i.e., Heilongjiang Publishing and Lotus Health go up and down completely randomly.

Pair Corralation between Heilongjiang Publishing and Lotus Health

Assuming the 90 days trading horizon Heilongjiang Publishing Media is expected to under-perform the Lotus Health. But the stock apears to be less risky and, when comparing its historical volatility, Heilongjiang Publishing Media is 1.52 times less risky than Lotus Health. The stock trades about -0.32 of its potential returns per unit of risk. The Lotus Health Group is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  568.00  in Lotus Health Group on October 9, 2024 and sell it today you would lose (60.00) from holding Lotus Health Group or give up 10.56% of portfolio value over 90 days.

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

Heilongjiang Publishing Media  vs.  Lotus Health Group

Heilongjiang Publishing

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lotus Health Group

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lotus Health Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lotus Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Heilongjiang Publishing and Lotus Health

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

The idea behind Heilongjiang Publishing Media and Lotus Health Group 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.