Correlation Between Eyebright Medical and Hainan Shuangcheng

Can any of the company-specific risk be diversified away by investing in both Eyebright Medical and Hainan Shuangcheng 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 Hainan Shuangcheng 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 Hainan Shuangcheng Pharmaceut, you can compare the effects of market volatilities on Eyebright Medical and Hainan Shuangcheng 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 Hainan Shuangcheng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eyebright Medical and Hainan Shuangcheng.

Diversification Opportunities for Eyebright Medical and Hainan Shuangcheng

0.33

Correlation Coefficient

Eyebright Medical  Hainan Shuangcheng

Weak diversification

The 3 months correlation between Eyebright and Hainan is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Eyebright Medical Technology and Hainan Shuangcheng Pharmaceut in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Shuangcheng 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 Hainan Shuangcheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Shuangcheng has no effect on the direction of Eyebright Medical i.e., Eyebright Medical and Hainan Shuangcheng go up and down completely randomly.

Pair Corralation between Eyebright Medical and Hainan Shuangcheng

Assuming the 90 days trading horizon Eyebright Medical Technology is expected to under-perform the Hainan Shuangcheng. But the stock apears to be less risky and, when comparing its historical volatility, Eyebright Medical Technology is 2.14 times less risky than Hainan Shuangcheng. The stock trades about -0.06 of its potential returns per unit of risk. The Hainan Shuangcheng Pharmaceut is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,800  in Hainan Shuangcheng Pharmaceut on October 8, 2024 and sell it today you would earn a total of  14.00  from holding Hainan Shuangcheng Pharmaceut or generate 0.78% return on investment over 90 days.

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

Eyebright Medical Technology  vs.  Hainan Shuangcheng Pharmaceut

Eyebright Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eyebright Medical Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hainan Shuangcheng

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Shuangcheng Pharmaceut are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hainan Shuangcheng sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eyebright Medical and Hainan Shuangcheng

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

The idea behind Eyebright Medical Technology and Hainan Shuangcheng Pharmaceut 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.