Correlation Between Qingdao Haier and CareRay Digital

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

By analyzing existing cross correlation between Qingdao Haier Biomedical and CareRay Digital Medical, you can compare the effects of market volatilities on Qingdao Haier and CareRay Digital 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 Qingdao Haier with a short position of CareRay Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qingdao Haier and CareRay Digital.

Diversification Opportunities for Qingdao Haier and CareRay Digital

0.37

Correlation Coefficient

Qingdao Haier  CareRay Digital

Weak diversification

The 3 months correlation between Qingdao and CareRay is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Qingdao Haier Biomedical and CareRay Digital Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareRay Digital Medical and Qingdao Haier 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 Qingdao Haier Biomedical are associated (or correlated) with CareRay Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareRay Digital Medical has no effect on the direction of Qingdao Haier i.e., Qingdao Haier and CareRay Digital go up and down completely randomly.

Pair Corralation between Qingdao Haier and CareRay Digital

Assuming the 90 days trading horizon Qingdao Haier Biomedical is expected to under-perform the CareRay Digital. In addition to that, Qingdao Haier is 1.11 times more volatile than CareRay Digital Medical. It trades about -0.01 of its total potential returns per unit of risk. CareRay Digital Medical is currently generating about 0.15 per unit of volatility. If you would invest  1,409  in CareRay Digital Medical on December 26, 2024 and sell it today you would earn a total of  248.00  from holding CareRay Digital Medical or generate 17.6% return on investment over 90 days.

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

Qingdao Haier Biomedical  vs.  CareRay Digital Medical

Qingdao Haier Biomedical

Risk-Adjusted Performance

Very Weak

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

CareRay Digital Medical

Risk-Adjusted Performance

OK

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

Pair Trading with Qingdao Haier and CareRay Digital

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

The idea behind Qingdao Haier Biomedical and CareRay Digital Medical 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.