Correlation Between Xiangyu Medical and Jiangxi Hengda

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

By analyzing existing cross correlation between Xiangyu Medical Co and Jiangxi Hengda Hi Tech, you can compare the effects of market volatilities on Xiangyu Medical and Jiangxi Hengda 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 Xiangyu Medical with a short position of Jiangxi Hengda. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiangyu Medical and Jiangxi Hengda.

Diversification Opportunities for Xiangyu Medical and Jiangxi Hengda

0.52

Correlation Coefficient

Xiangyu Medical  Jiangxi Hengda

Very weak diversification

The 3 months correlation between Xiangyu and Jiangxi is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Xiangyu Medical Co and Jiangxi Hengda Hi Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangxi Hengda Hi and Xiangyu 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 Xiangyu Medical Co are associated (or correlated) with Jiangxi Hengda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangxi Hengda Hi has no effect on the direction of Xiangyu Medical i.e., Xiangyu Medical and Jiangxi Hengda go up and down completely randomly.

Pair Corralation between Xiangyu Medical and Jiangxi Hengda

Assuming the 90 days trading horizon Xiangyu Medical Co is expected to generate 1.27 times more return on investment than Jiangxi Hengda. However, Xiangyu Medical is 1.27 times more volatile than Jiangxi Hengda Hi Tech. It trades about 0.1 of its potential returns per unit of risk. Jiangxi Hengda Hi Tech is currently generating about 0.05 per unit of risk. If you would invest  3,139  in Xiangyu Medical Co on December 25, 2024 and sell it today you would earn a total of  575.00  from holding Xiangyu Medical Co or generate 18.32% return on investment over 90 days.

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

Xiangyu Medical Co  vs.  Jiangxi Hengda Hi Tech

Xiangyu Medical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xiangyu Medical Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiangyu Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiangxi Hengda Hi

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangxi Hengda Hi Tech are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangxi Hengda may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Xiangyu Medical and Jiangxi Hengda

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

The idea behind Xiangyu Medical Co and Jiangxi Hengda Hi Tech 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.