Correlation Between Everdisplay Optronics and Shenzhen Mindray

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

By analyzing existing cross correlation between Everdisplay Optronics Shanghai and Shenzhen Mindray Bio Medical, you can compare the effects of market volatilities on Everdisplay Optronics and Shenzhen Mindray 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 Everdisplay Optronics with a short position of Shenzhen Mindray. Check out your portfolio center. Please also check ongoing floating volatility patterns of Everdisplay Optronics and Shenzhen Mindray.

Diversification Opportunities for Everdisplay Optronics and Shenzhen Mindray

0.68

Correlation Coefficient

Everdisplay Optronics  Shenzhen Mindray

Poor diversification

The 3 months correlation between Everdisplay and Shenzhen is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Everdisplay Optronics Shanghai and Shenzhen Mindray Bio Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Mindray Bio and Everdisplay Optronics 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 Everdisplay Optronics Shanghai are associated (or correlated) with Shenzhen Mindray. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Mindray Bio has no effect on the direction of Everdisplay Optronics i.e., Everdisplay Optronics and Shenzhen Mindray go up and down completely randomly.

Pair Corralation between Everdisplay Optronics and Shenzhen Mindray

Assuming the 90 days trading horizon Everdisplay Optronics Shanghai is expected to generate 1.01 times more return on investment than Shenzhen Mindray. However, Everdisplay Optronics is 1.01 times more volatile than Shenzhen Mindray Bio Medical. It trades about 0.04 of its potential returns per unit of risk. Shenzhen Mindray Bio Medical is currently generating about 0.0 per unit of risk. If you would invest  224.00  in Everdisplay Optronics Shanghai on September 27, 2024 and sell it today you would earn a total of  12.00  from holding Everdisplay Optronics Shanghai or generate 5.36% return on investment over 90 days.

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

Everdisplay Optronics Shanghai  vs.  Shenzhen Mindray Bio Medical

Everdisplay Optronics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Everdisplay Optronics Shanghai are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Everdisplay Optronics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Shenzhen Mindray Bio

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Everdisplay Optronics and Shenzhen Mindray

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

The idea behind Everdisplay Optronics Shanghai and Shenzhen Mindray Bio 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.

Check out your portfolio center.

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 Money Managers module to screen money managers from public funds and ETFs managed around the world.