Correlation Between Aofu Environmental and Sanbo Hospital

Can any of the company-specific risk be diversified away by investing in both Aofu Environmental and Sanbo Hospital 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 Aofu Environmental and Sanbo Hospital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aofu Environmental Technology and Sanbo Hospital Management, you can compare the effects of market volatilities on Aofu Environmental and Sanbo Hospital 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 Aofu Environmental with a short position of Sanbo Hospital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aofu Environmental and Sanbo Hospital.

Diversification Opportunities for Aofu Environmental and Sanbo Hospital

0.8

Correlation Coefficient

Aofu Environmental  Sanbo Hospital

Very poor diversification

The 3 months correlation between Aofu and Sanbo is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Aofu Environmental Technology and Sanbo Hospital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanbo Hospital Management and Aofu Environmental 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 Aofu Environmental Technology are associated (or correlated) with Sanbo Hospital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanbo Hospital Management has no effect on the direction of Aofu Environmental i.e., Aofu Environmental and Sanbo Hospital go up and down completely randomly.

Pair Corralation between Aofu Environmental and Sanbo Hospital

Assuming the 90 days trading horizon Aofu Environmental Technology is expected to under-perform the Sanbo Hospital. But the stock apears to be less risky and, when comparing its historical volatility, Aofu Environmental Technology is 1.36 times less risky than Sanbo Hospital. The stock trades about -0.03 of its potential returns per unit of risk. The Sanbo Hospital Management is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,991  in Sanbo Hospital Management on October 15, 2024 and sell it today you would earn a total of  169.00  from holding Sanbo Hospital Management or generate 4.23% return on investment over 90 days.

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

Aofu Environmental Technology  vs.  Sanbo Hospital Management

Aofu Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sanbo Hospital Management

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Aofu Environmental and Sanbo Hospital

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

The idea behind Aofu Environmental Technology and Sanbo Hospital 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.