Correlation Between CareRay Digital and Shandong Homey

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

Diversification Opportunities for CareRay Digital and Shandong Homey

0.28

Correlation Coefficient

CareRay Digital  Shandong Homey

Modest diversification

The 3 months correlation between CareRay and Shandong is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding CareRay Digital Medical and Shandong Homey Aquatic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Homey Aquatic 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 Shandong Homey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Homey Aquatic has no effect on the direction of CareRay Digital i.e., CareRay Digital and Shandong Homey go up and down completely randomly.

Pair Corralation between CareRay Digital and Shandong Homey

Assuming the 90 days trading horizon CareRay Digital Medical is expected to generate 0.63 times more return on investment than Shandong Homey. However, CareRay Digital Medical is 1.58 times less risky than Shandong Homey. It trades about 0.15 of its potential returns per unit of risk. Shandong Homey Aquatic is currently generating about 0.06 per unit of risk. If you would invest  1,379  in CareRay Digital Medical on December 25, 2024 and sell it today you would earn a total of  241.00  from holding CareRay Digital Medical or generate 17.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

CareRay Digital Medical  vs.  Shandong Homey Aquatic

CareRay Digital Medical

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CareRay Digital Medical are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CareRay Digital sustained solid returns over the last few months and may actually be approaching a breakup point.

Shandong Homey Aquatic

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Homey Aquatic are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Homey may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CareRay Digital and Shandong Homey

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

The idea behind CareRay Digital Medical and Shandong Homey Aquatic 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .