Correlation Between CareRay Digital and Dazhong Transportation

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

Diversification Opportunities for CareRay Digital and Dazhong Transportation

0.92

Correlation Coefficient

CareRay Digital  Dazhong Transportation

Almost no diversification

The 3 months correlation between CareRay and Dazhong is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding CareRay Digital Medical and Dazhong Transportation Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dazhong Transportation 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 Dazhong Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dazhong Transportation has no effect on the direction of CareRay Digital i.e., CareRay Digital and Dazhong Transportation go up and down completely randomly.

Pair Corralation between CareRay Digital and Dazhong Transportation

Assuming the 90 days trading horizon CareRay Digital Medical is expected to generate 1.29 times more return on investment than Dazhong Transportation. However, CareRay Digital is 1.29 times more volatile than Dazhong Transportation Group. It trades about -0.08 of its potential returns per unit of risk. Dazhong Transportation Group is currently generating about -0.27 per unit of risk. If you would invest  1,485  in CareRay Digital Medical on September 28, 2024 and sell it today you would lose (76.00) from holding CareRay Digital Medical or give up 5.12% of portfolio value over 90 days.

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

CareRay Digital Medical  vs.  Dazhong Transportation Group

CareRay Digital Medical

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CareRay Digital Medical are ranked lower than 4 (%) 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 January 2025.

Dazhong Transportation

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with CareRay Digital and Dazhong Transportation

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

The idea behind CareRay Digital Medical and Dazhong Transportation Group 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..