Correlation Between CareRay Digital and Henan Provincial

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

Diversification Opportunities for CareRay Digital and Henan Provincial

0.3

Correlation Coefficient

CareRay Digital  Henan Provincial

Weak diversification

The 3 months correlation between CareRay and Henan is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding CareRay Digital Medical and Henan Provincial Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henan Provincial Com 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 Henan Provincial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henan Provincial Com has no effect on the direction of CareRay Digital i.e., CareRay Digital and Henan Provincial go up and down completely randomly.

Pair Corralation between CareRay Digital and Henan Provincial

Assuming the 90 days trading horizon CareRay Digital Medical is expected to generate 0.92 times more return on investment than Henan Provincial. However, CareRay Digital Medical is 1.09 times less risky than Henan Provincial. It trades about 0.0 of its potential returns per unit of risk. Henan Provincial Communications is currently generating about -0.08 per unit of risk. If you would invest  1,325  in CareRay Digital Medical on October 9, 2024 and sell it today you would lose (38.00) from holding CareRay Digital Medical or give up 2.87% of portfolio value over 90 days.

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

CareRay Digital Medical  vs.  Henan Provincial Communication

CareRay Digital Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CareRay Digital Medical has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Henan Provincial Com

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Henan Provincial Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with CareRay Digital and Henan Provincial

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

The idea behind CareRay Digital Medical and Henan Provincial Communications 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.