Correlation Between CareRay Digital and Road Environment

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

Diversification Opportunities for CareRay Digital and Road Environment

0.47

Correlation Coefficient

CareRay Digital  Road Environment

Very weak diversification

The 3 months correlation between CareRay and Road is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding CareRay Digital Medical and Road Environment Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Road Environment Tec 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 Road Environment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Road Environment Tec has no effect on the direction of CareRay Digital i.e., CareRay Digital and Road Environment go up and down completely randomly.

Pair Corralation between CareRay Digital and Road Environment

Assuming the 90 days trading horizon CareRay Digital Medical is expected to generate 0.6 times more return on investment than Road Environment. However, CareRay Digital Medical is 1.68 times less risky than Road Environment. It trades about 0.31 of its potential returns per unit of risk. Road Environment Technology is currently generating about 0.0 per unit of risk. If you would invest  1,456  in CareRay Digital Medical on December 2, 2024 and sell it today you would earn a total of  122.00  from holding CareRay Digital Medical or generate 8.38% return on investment over 90 days.

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

CareRay Digital Medical  vs.  Road Environment Technology

CareRay Digital Medical

Risk-Adjusted Performance

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.

Road Environment Tec

Risk-Adjusted Performance

Very Weak

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

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

The idea behind CareRay Digital Medical and Road Environment Technology 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.