Correlation Between Xiangyu Medical and Zhonghong Pulin

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

Diversification Opportunities for Xiangyu Medical and Zhonghong Pulin

0.88

Correlation Coefficient

Xiangyu Medical  Zhonghong Pulin

Very poor diversification

The 3 months correlation between Xiangyu and Zhonghong is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Xiangyu Medical Co and Zhonghong Pulin Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhonghong Pulin Medical 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 Zhonghong Pulin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhonghong Pulin Medical has no effect on the direction of Xiangyu Medical i.e., Xiangyu Medical and Zhonghong Pulin go up and down completely randomly.

Pair Corralation between Xiangyu Medical and Zhonghong Pulin

Assuming the 90 days trading horizon Xiangyu Medical Co is expected to generate 1.53 times more return on investment than Zhonghong Pulin. However, Xiangyu Medical is 1.53 times more volatile than Zhonghong Pulin Medical. It trades about 0.08 of its potential returns per unit of risk. Zhonghong Pulin Medical is currently generating about -0.15 per unit of risk. If you would invest  3,199  in Xiangyu Medical Co on September 22, 2024 and sell it today you would earn a total of  192.00  from holding Xiangyu Medical Co or generate 6.0% return on investment over 90 days.

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

Xiangyu Medical Co  vs.  Zhonghong Pulin Medical

Xiangyu Medical

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xiangyu Medical Co are ranked lower than 13 (%) 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.

Zhonghong Pulin Medical

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhonghong Pulin Medical are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhonghong Pulin sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xiangyu Medical and Zhonghong Pulin

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

The idea behind Xiangyu Medical Co and Zhonghong Pulin Medical 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.