Correlation Between Concord Medical and Nova Leap

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

By analyzing existing cross correlation between Concord Medical Services and Nova Leap Health, you can compare the effects of market volatilities on Concord Medical and Nova Leap 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 Concord Medical with a short position of Nova Leap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Concord Medical and Nova Leap.

Diversification Opportunities for Concord Medical and Nova Leap

0.7

Correlation Coefficient

Concord Medical  Nova Leap

Poor diversification

The 3 months correlation between Concord and Nova is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Concord Medical Services and Nova Leap Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Leap Health and Concord 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 Concord Medical Services are associated (or correlated) with Nova Leap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Leap Health has no effect on the direction of Concord Medical i.e., Concord Medical and Nova Leap go up and down completely randomly.

Pair Corralation between Concord Medical and Nova Leap

Considering the 90-day investment horizon Concord Medical Services is expected to generate 3.62 times more return on investment than Nova Leap. However, Concord Medical is 3.62 times more volatile than Nova Leap Health. It trades about 0.09 of its potential returns per unit of risk. Nova Leap Health is currently generating about -0.17 per unit of risk. If you would invest  442.00  in Concord Medical Services on October 21, 2024 and sell it today you would earn a total of  28.00  from holding Concord Medical Services or generate 6.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Concord Medical Services  vs.  Nova Leap Health

Concord Medical Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Concord Medical Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Nova Leap Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nova Leap Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Nova Leap is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Concord Medical and Nova Leap

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

The idea behind Concord Medical Services and Nova Leap Health 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.