Correlation Between China DatangRenewable and Redcare Pharmacy

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

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

Diversification Opportunities for China DatangRenewable and Redcare Pharmacy

0.17

Correlation Coefficient

China DatangRenewable  Redcare Pharmacy

Average diversification

The 3 months correlation between China and Redcare is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding China Datang and Redcare Pharmacy NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redcare Pharmacy and China DatangRenewable 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 Datang are associated (or correlated) with Redcare Pharmacy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redcare Pharmacy has no effect on the direction of China DatangRenewable i.e., China DatangRenewable and Redcare Pharmacy go up and down completely randomly.

Pair Corralation between China DatangRenewable and Redcare Pharmacy

Assuming the 90 days horizon China DatangRenewable is expected to generate 9.96 times less return on investment than Redcare Pharmacy. But when comparing it to its historical volatility, China Datang is 7.34 times less risky than Redcare Pharmacy. It trades about 0.04 of its potential returns per unit of risk. Redcare Pharmacy NV is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,098  in Redcare Pharmacy NV on October 10, 2024 and sell it today you would earn a total of  6,562  from holding Redcare Pharmacy NV or generate 107.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

China Datang  vs.  Redcare Pharmacy NV

China DatangRenewable

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Datang are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China DatangRenewable reported solid returns over the last few months and may actually be approaching a breakup point.

Redcare Pharmacy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Redcare Pharmacy NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with China DatangRenewable and Redcare Pharmacy

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

The idea behind China Datang and Redcare Pharmacy NV 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.