Correlation Between DELCATH SYS and China Medical

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

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

Diversification Opportunities for DELCATH SYS and China Medical

-0.06

Correlation Coefficient

DELCATH SYS  China Medical

Good diversification

The 3 months correlation between DELCATH and China is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding DELCATH SYS NEW 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 DELCATH SYS 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 DELCATH SYS NEW 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 DELCATH SYS i.e., DELCATH SYS and China Medical go up and down completely randomly.

Pair Corralation between DELCATH SYS and China Medical

Assuming the 90 days trading horizon DELCATH SYS NEW is expected to generate 1.95 times more return on investment than China Medical. However, DELCATH SYS is 1.95 times more volatile than China Medical System. It trades about 0.08 of its potential returns per unit of risk. China Medical System is currently generating about 0.04 per unit of risk. If you would invest  1,050  in DELCATH SYS NEW on December 22, 2024 and sell it today you would earn a total of  180.00  from holding DELCATH SYS NEW or generate 17.14% return on investment over 90 days.

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

DELCATH SYS NEW  vs.  China Medical System

DELCATH SYS NEW

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DELCATH SYS NEW are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DELCATH SYS reported solid returns over the last few months and may actually be approaching a breakup point.

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 DELCATH SYS and China Medical

The main advantage of trading using opposite DELCATH SYS and China Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DELCATH SYS 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 DELCATH SYS NEW 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.