Correlation Between China Health and Environmmtl Tectonic

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

Diversification Opportunities for China Health and Environmmtl Tectonic

0.11

Correlation Coefficient

China Health  Environmmtl Tectonic

Average diversification

The 3 months correlation between China and Environmmtl is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding China Health Management and Environmmtl Tectonic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Environmmtl Tectonic 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 Environmmtl Tectonic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Environmmtl Tectonic has no effect on the direction of China Health i.e., China Health and Environmmtl Tectonic go up and down completely randomly.

Pair Corralation between China Health and Environmmtl Tectonic

Given the investment horizon of 90 days China Health Management is expected to generate 3.04 times more return on investment than Environmmtl Tectonic. However, China Health is 3.04 times more volatile than Environmmtl Tectonic. It trades about 0.05 of its potential returns per unit of risk. Environmmtl Tectonic is currently generating about 0.03 per unit of risk. If you would invest  0.41  in China Health Management on September 29, 2024 and sell it today you would lose (0.01) from holding China Health Management or give up 2.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

China Health Management  vs.  Environmmtl Tectonic

China Health Management

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Health Management are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical indicators, China Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Environmmtl Tectonic

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Environmmtl Tectonic are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, Environmmtl Tectonic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with China Health and Environmmtl Tectonic

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

The idea behind China Health Management and Environmmtl Tectonic 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.