Correlation Between CareRay Digital and Cangzhou Mingzhu

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

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

Diversification Opportunities for CareRay Digital and Cangzhou Mingzhu

0.83

Correlation Coefficient

CareRay Digital  Cangzhou Mingzhu

Very poor diversification

The 3 months correlation between CareRay and Cangzhou is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding CareRay Digital Medical and Cangzhou Mingzhu Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cangzhou Mingzhu Plastic and CareRay Digital 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 CareRay Digital Medical are associated (or correlated) with Cangzhou Mingzhu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cangzhou Mingzhu Plastic has no effect on the direction of CareRay Digital i.e., CareRay Digital and Cangzhou Mingzhu go up and down completely randomly.

Pair Corralation between CareRay Digital and Cangzhou Mingzhu

Assuming the 90 days trading horizon CareRay Digital Medical is expected to generate 1.75 times more return on investment than Cangzhou Mingzhu. However, CareRay Digital is 1.75 times more volatile than Cangzhou Mingzhu Plastic. It trades about 0.0 of its potential returns per unit of risk. Cangzhou Mingzhu Plastic is currently generating about 0.0 per unit of risk. If you would invest  1,596  in CareRay Digital Medical on October 24, 2024 and sell it today you would lose (185.00) from holding CareRay Digital Medical or give up 11.59% of portfolio value over 90 days.

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

CareRay Digital Medical  vs.  Cangzhou Mingzhu Plastic

CareRay Digital Medical

Risk-Adjusted Performance

3 of 100

Insignificant

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

Cangzhou Mingzhu Plastic

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with CareRay Digital and Cangzhou Mingzhu

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

The idea behind CareRay Digital Medical and Cangzhou Mingzhu Plastic 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.