Correlation Between Xiangyu Medical and Shenzhen Changfang

Can any of the company-specific risk be diversified away by investing in both Xiangyu Medical and Shenzhen Changfang 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 Shenzhen Changfang 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 Shenzhen Changfang Light, you can compare the effects of market volatilities on Xiangyu Medical and Shenzhen Changfang 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 Shenzhen Changfang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiangyu Medical and Shenzhen Changfang.

Diversification Opportunities for Xiangyu Medical and Shenzhen Changfang

0.5

Correlation Coefficient

Xiangyu Medical  Shenzhen Changfang

Very weak diversification

The 3 months correlation between Xiangyu and Shenzhen is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Xiangyu Medical Co and Shenzhen Changfang Light in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Changfang Light 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 Shenzhen Changfang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Changfang Light has no effect on the direction of Xiangyu Medical i.e., Xiangyu Medical and Shenzhen Changfang go up and down completely randomly.

Pair Corralation between Xiangyu Medical and Shenzhen Changfang

Assuming the 90 days trading horizon Xiangyu Medical is expected to generate 3.66 times less return on investment than Shenzhen Changfang. In addition to that, Xiangyu Medical is 1.08 times more volatile than Shenzhen Changfang Light. It trades about 0.03 of its total potential returns per unit of risk. Shenzhen Changfang Light is currently generating about 0.11 per unit of volatility. If you would invest  154.00  in Shenzhen Changfang Light on October 24, 2024 and sell it today you would earn a total of  35.00  from holding Shenzhen Changfang Light or generate 22.73% 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.  Shenzhen Changfang Light

Xiangyu Medical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xiangyu Medical Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiangyu Medical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Shenzhen Changfang Light

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Changfang Light are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Changfang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xiangyu Medical and Shenzhen Changfang

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

The idea behind Xiangyu Medical Co and Shenzhen Changfang Light 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.