Correlation Between CareRay Digital and Zhongfu Information

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

Diversification Opportunities for CareRay Digital and Zhongfu Information

0.85

Correlation Coefficient

CareRay Digital  Zhongfu Information

Very poor diversification

The 3 months correlation between CareRay and Zhongfu is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding CareRay Digital Medical and Zhongfu Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongfu Information 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 Zhongfu Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongfu Information has no effect on the direction of CareRay Digital i.e., CareRay Digital and Zhongfu Information go up and down completely randomly.

Pair Corralation between CareRay Digital and Zhongfu Information

Assuming the 90 days trading horizon CareRay Digital Medical is expected to generate 0.76 times more return on investment than Zhongfu Information. However, CareRay Digital Medical is 1.31 times less risky than Zhongfu Information. It trades about -0.01 of its potential returns per unit of risk. Zhongfu Information is currently generating about -0.01 per unit of risk. If you would invest  2,155  in CareRay Digital Medical on October 25, 2024 and sell it today you would lose (743.00) from holding CareRay Digital Medical or give up 34.48% 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.  Zhongfu Information

CareRay Digital Medical

Risk-Adjusted Performance

1 of 100

Weak

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

Zhongfu Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhongfu Information has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Zhongfu Information 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 Zhongfu Information

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

The idea behind CareRay Digital Medical and Zhongfu Information 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 Stocks Directory module to find actively traded stocks across global markets.