Correlation Between Alpha One and China Health

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

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

Diversification Opportunities for Alpha One and China Health

0.05

Correlation Coefficient

Alpha One  China Health

Significant diversification

The 3 months correlation between Alpha and China is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Alpha One and China Health Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Health Management and Alpha One 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 Alpha One are associated (or correlated) with China Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Health Management has no effect on the direction of Alpha One i.e., Alpha One and China Health go up and down completely randomly.

Pair Corralation between Alpha One and China Health

If you would invest  0.34  in China Health Management on December 28, 2024 and sell it today you would earn a total of  0.15  from holding China Health Management or generate 44.12% return on investment over 90 days.

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

Alpha One  vs.  China Health Management

Alpha One

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alpha One has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Alpha One is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

China Health Management

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Health Management are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical indicators, China Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alpha One and China Health

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

The idea behind Alpha One and China Health Management 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.