Correlation Between Nanjing Vishee and China Reform

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

By analyzing existing cross correlation between Nanjing Vishee Medical and China Reform Health, you can compare the effects of market volatilities on Nanjing Vishee and China Reform 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 Nanjing Vishee with a short position of China Reform. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nanjing Vishee and China Reform.

Diversification Opportunities for Nanjing Vishee and China Reform

0.84

Correlation Coefficient

Nanjing Vishee  China Reform

Very poor diversification

The 3 months correlation between Nanjing and China is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Nanjing Vishee Medical and China Reform Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Reform Health and Nanjing Vishee 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 Nanjing Vishee Medical are associated (or correlated) with China Reform. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Reform Health has no effect on the direction of Nanjing Vishee i.e., Nanjing Vishee and China Reform go up and down completely randomly.

Pair Corralation between Nanjing Vishee and China Reform

Assuming the 90 days trading horizon Nanjing Vishee Medical is expected to generate 0.78 times more return on investment than China Reform. However, Nanjing Vishee Medical is 1.28 times less risky than China Reform. It trades about 0.08 of its potential returns per unit of risk. China Reform Health is currently generating about -0.01 per unit of risk. If you would invest  3,020  in Nanjing Vishee Medical on December 26, 2024 and sell it today you would earn a total of  334.00  from holding Nanjing Vishee Medical or generate 11.06% return on investment over 90 days.

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

Nanjing Vishee Medical  vs.  China Reform Health

Nanjing Vishee Medical

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nanjing Vishee Medical are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nanjing Vishee sustained solid returns over the last few months and may actually be approaching a breakup point.

China Reform Health

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Nanjing Vishee and China Reform

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

The idea behind Nanjing Vishee Medical and China Reform Health 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.