Correlation Between Eyebright Medical and Hengkang Medical

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

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

Diversification Opportunities for Eyebright Medical and Hengkang Medical

-0.43

Correlation Coefficient

Eyebright Medical  Hengkang Medical

Very good diversification

The 3 months correlation between Eyebright and Hengkang is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Eyebright Medical Technology and Hengkang Medical Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengkang Medical and Eyebright Medical 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 Eyebright Medical Technology are associated (or correlated) with Hengkang Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengkang Medical has no effect on the direction of Eyebright Medical i.e., Eyebright Medical and Hengkang Medical go up and down completely randomly.

Pair Corralation between Eyebright Medical and Hengkang Medical

Assuming the 90 days trading horizon Eyebright Medical Technology is expected to generate 0.83 times more return on investment than Hengkang Medical. However, Eyebright Medical Technology is 1.2 times less risky than Hengkang Medical. It trades about 0.02 of its potential returns per unit of risk. Hengkang Medical Group is currently generating about -0.07 per unit of risk. If you would invest  9,255  in Eyebright Medical Technology on December 27, 2024 and sell it today you would earn a total of  152.00  from holding Eyebright Medical Technology or generate 1.64% return on investment over 90 days.

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

Eyebright Medical Technology  vs.  Hengkang Medical Group

Eyebright Medical

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eyebright Medical Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Eyebright Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hengkang Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hengkang Medical Group 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 Eyebright Medical and Hengkang Medical

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

The idea behind Eyebright Medical Technology and Hengkang Medical 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..