Correlation Between China Health and Blockchain Industries

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

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

Diversification Opportunities for China Health and Blockchain Industries

-0.07

Correlation Coefficient

China Health  Blockchain Industries

Good diversification

The 3 months correlation between China and Blockchain is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding China Health Management and Blockchain Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blockchain Industries and China 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 China Health Management are associated (or correlated) with Blockchain Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blockchain Industries has no effect on the direction of China Health i.e., China Health and Blockchain Industries go up and down completely randomly.

Pair Corralation between China Health and Blockchain Industries

Given the investment horizon of 90 days China Health Management is expected to under-perform the Blockchain Industries. But the pink sheet apears to be less risky and, when comparing its historical volatility, China Health Management is 1.48 times less risky than Blockchain Industries. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Blockchain Industries is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1.77  in Blockchain Industries on September 17, 2024 and sell it today you would earn a total of  0.63  from holding Blockchain Industries or generate 35.59% return on investment over 90 days.

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

China Health Management  vs.  Blockchain Industries

China Health Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Health Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Blockchain Industries

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blockchain Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Blockchain Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Health and Blockchain Industries

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

The idea behind China Health Management and Blockchain Industries 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.