Correlation Between Cardio Diagnostics and China Pharma

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

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

Diversification Opportunities for Cardio Diagnostics and China Pharma

-0.53

Correlation Coefficient

Cardio Diagnostics  China Pharma

Excellent diversification

The 3 months correlation between Cardio and China is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Cardio Diagnostics Holdings and China Pharma Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Pharma Holdings and Cardio Diagnostics 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 Cardio Diagnostics Holdings are associated (or correlated) with China Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Pharma Holdings has no effect on the direction of Cardio Diagnostics i.e., Cardio Diagnostics and China Pharma go up and down completely randomly.

Pair Corralation between Cardio Diagnostics and China Pharma

Assuming the 90 days horizon Cardio Diagnostics Holdings is expected to generate 13.4 times more return on investment than China Pharma. However, Cardio Diagnostics is 13.4 times more volatile than China Pharma Holdings. It trades about 0.09 of its potential returns per unit of risk. China Pharma Holdings is currently generating about -0.05 per unit of risk. If you would invest  12.00  in Cardio Diagnostics Holdings on October 3, 2024 and sell it today you would lose (3.70) from holding Cardio Diagnostics Holdings or give up 30.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	80.1%
Values	Daily Returns

Cardio Diagnostics Holdings  vs.  China Pharma Holdings

Cardio Diagnostics

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cardio Diagnostics Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Cardio Diagnostics showed solid returns over the last few months and may actually be approaching a breakup point.

China Pharma Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Pharma Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, China Pharma is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Cardio Diagnostics and China Pharma

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

The idea behind Cardio Diagnostics Holdings and China Pharma Holdings 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.