Correlation Between Allgens Medical and Hubei Dinglong

Can any of the company-specific risk be diversified away by investing in both Allgens Medical and Hubei Dinglong 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 Allgens Medical and Hubei Dinglong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Allgens Medical Technology and Hubei Dinglong Chemical, you can compare the effects of market volatilities on Allgens Medical and Hubei Dinglong 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 Allgens Medical with a short position of Hubei Dinglong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allgens Medical and Hubei Dinglong.

Diversification Opportunities for Allgens Medical and Hubei Dinglong

0.94

Correlation Coefficient

Allgens Medical  Hubei Dinglong

Almost no diversification

The 3 months correlation between Allgens and Hubei is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Allgens Medical Technology and Hubei Dinglong Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hubei Dinglong Chemical and Allgens Medical 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 Allgens Medical Technology are associated (or correlated) with Hubei Dinglong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hubei Dinglong Chemical has no effect on the direction of Allgens Medical i.e., Allgens Medical and Hubei Dinglong go up and down completely randomly.

Pair Corralation between Allgens Medical and Hubei Dinglong

Assuming the 90 days trading horizon Allgens Medical is expected to generate 1.27 times less return on investment than Hubei Dinglong. But when comparing it to its historical volatility, Allgens Medical Technology is 1.13 times less risky than Hubei Dinglong. It trades about 0.17 of its potential returns per unit of risk. Hubei Dinglong Chemical is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,892  in Hubei Dinglong Chemical on September 12, 2024 and sell it today you would earn a total of  862.00  from holding Hubei Dinglong Chemical or generate 45.56% return on investment over 90 days.

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

Allgens Medical Technology  vs.  Hubei Dinglong Chemical

Allgens Medical Tech

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allgens Medical Technology are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Allgens Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Hubei Dinglong Chemical

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hubei Dinglong Chemical are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hubei Dinglong sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allgens Medical and Hubei Dinglong

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

The idea behind Allgens Medical Technology and Hubei Dinglong Chemical 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.