Correlation Between China Health and Burnham Holdings

Can any of the company-specific risk be diversified away by investing in both China Health and Burnham Holdings 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 Burnham Holdings 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 Burnham Holdings, you can compare the effects of market volatilities on China Health and Burnham Holdings 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 Burnham Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Health and Burnham Holdings.

Diversification Opportunities for China Health and Burnham Holdings

-0.02

Correlation Coefficient

China Health  Burnham Holdings

Good diversification

The 3 months correlation between China and Burnham is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding China Health Management and Burnham Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burnham Holdings 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 Burnham Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burnham Holdings has no effect on the direction of China Health i.e., China Health and Burnham Holdings go up and down completely randomly.

Pair Corralation between China Health and Burnham Holdings

Given the investment horizon of 90 days China Health Management is expected to under-perform the Burnham Holdings. In addition to that, China Health is 4.42 times more volatile than Burnham Holdings. It trades about -0.27 of its total potential returns per unit of risk. Burnham Holdings is currently generating about -0.11 per unit of volatility. If you would invest  1,412  in Burnham Holdings on October 15, 2024 and sell it today you would lose (19.00) from holding Burnham Holdings or give up 1.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

China Health Management  vs.  Burnham Holdings

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 rather sound technical indicators, China Health is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Burnham Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Burnham Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Burnham Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Health and Burnham Holdings

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

The idea behind China Health Management and Burnham 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.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..