Correlation Between China Health and Global Blockchain

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

Diversification Opportunities for China Health and Global Blockchain

0.32

Correlation Coefficient

China Health  Global Blockchain

Weak diversification

The 3 months correlation between China and Global is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding China Health Management and Global Blockchain Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Blockchain 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 Global Blockchain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Blockchain has no effect on the direction of China Health i.e., China Health and Global Blockchain go up and down completely randomly.

Pair Corralation between China Health and Global Blockchain

Given the investment horizon of 90 days China Health Management is expected to generate 20.61 times more return on investment than Global Blockchain. However, China Health is 20.61 times more volatile than Global Blockchain Acquisition. It trades about 0.08 of its potential returns per unit of risk. Global Blockchain Acquisition is currently generating about 0.04 per unit of risk. If you would invest  0.40  in China Health Management on December 1, 2024 and sell it today you would earn a total of  0.09  from holding China Health Management or generate 22.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.75%
Values	Daily Returns

China Health Management  vs.  Global Blockchain Acquisition

China Health Management

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Health Management are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical indicators, China Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Global Blockchain

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global Blockchain Acquisition are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Global Blockchain is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with China Health and Global Blockchain

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

The idea behind China Health Management and Global Blockchain Acquisition 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.