Correlation Between CryoLife and China Medical

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

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

Diversification Opportunities for CryoLife and China Medical

-0.6

Correlation Coefficient

CryoLife  China Medical

Excellent diversification

The 3 months correlation between CryoLife and China is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding CryoLife and China Medical System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Medical System and CryoLife 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 CryoLife are associated (or correlated) with China Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Medical System has no effect on the direction of CryoLife i.e., CryoLife and China Medical go up and down completely randomly.

Pair Corralation between CryoLife and China Medical

Assuming the 90 days horizon CryoLife is expected to under-perform the China Medical. But the stock apears to be less risky and, when comparing its historical volatility, CryoLife is 1.12 times less risky than China Medical. The stock trades about -0.16 of its potential returns per unit of risk. The China Medical System is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  89.00  in China Medical System on December 22, 2024 and sell it today you would earn a total of  4.00  from holding China Medical System or generate 4.49% return on investment over 90 days.

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

CryoLife  vs.  China Medical System

CryoLife

Risk-Adjusted Performance

Very Weak

Over the last 90 days CryoLife has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

China Medical System

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Medical System are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, China Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CryoLife and China Medical

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

The idea behind CryoLife and China Medical System 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 Transaction History module to view history of all your transactions and understand their impact on performance.