Correlation Between Huaizhong Health and Intl Star

Can any of the company-specific risk be diversified away by investing in both Huaizhong Health and Intl Star 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 Huaizhong Health and Intl Star into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Huaizhong Health Group and Intl Star, you can compare the effects of market volatilities on Huaizhong Health and Intl Star 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 Huaizhong Health with a short position of Intl Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huaizhong Health and Intl Star.

Diversification Opportunities for Huaizhong Health and Intl Star

0.0

Correlation Coefficient

Huaizhong Health  Intl Star

Pay attention - limited upside

The 3 months correlation between Huaizhong and Intl is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Huaizhong Health Group and Intl Star in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intl Star and Huaizhong Health 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 Huaizhong Health Group are associated (or correlated) with Intl Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intl Star has no effect on the direction of Huaizhong Health i.e., Huaizhong Health and Intl Star go up and down completely randomly.

Pair Corralation between Huaizhong Health and Intl Star

Given the investment horizon of 90 days Huaizhong Health Group is expected to under-perform the Intl Star. But the pink sheet apears to be less risky and, when comparing its historical volatility, Huaizhong Health Group is 3.0 times less risky than Intl Star. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Intl Star is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.10  in Intl Star on October 23, 2024 and sell it today you would lose (0.01) from holding Intl Star or give up 10.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Huaizhong Health Group  vs.  Intl Star

Huaizhong Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huaizhong Health Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Huaizhong Health is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Intl Star

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Intl Star are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Intl Star unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Huaizhong Health and Intl Star

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

The idea behind Huaizhong Health Group and Intl Star 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.