Correlation Between Advanced Medical and China Medical

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

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

Diversification Opportunities for Advanced Medical and China Medical

-0.35

Correlation Coefficient

Advanced Medical  China Medical

Very good diversification

The 3 months correlation between Advanced and China is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Medical Solutions and China Medical System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Medical System and Advanced 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 Advanced Medical Solutions are associated (or correlated) with China Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Medical System has no effect on the direction of Advanced Medical i.e., Advanced Medical and China Medical go up and down completely randomly.

Pair Corralation between Advanced Medical and China Medical

Assuming the 90 days trading horizon Advanced Medical Solutions is expected to generate 1.2 times more return on investment than China Medical. However, Advanced Medical is 1.2 times more volatile than China Medical System. It trades about 0.01 of its potential returns per unit of risk. China Medical System is currently generating about -0.15 per unit of risk. If you would invest  236.00  in Advanced Medical Solutions on October 6, 2024 and sell it today you would earn a total of  0.00  from holding Advanced Medical Solutions or generate 0.0% return on investment over 90 days.

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

Advanced Medical Solutions  vs.  China Medical System

Advanced Medical Sol

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Medical Solutions are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Advanced Medical is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

China Medical System

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Medical System has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Advanced Medical and China Medical

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

The idea behind Advanced Medical Solutions and China Medical System 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.