Correlation Between Meihua International and Milestone Scientific

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

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

Diversification Opportunities for Meihua International and Milestone Scientific

0.7

Correlation Coefficient

Meihua International  Milestone Scientific

Poor diversification

The 3 months correlation between Meihua and Milestone is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Meihua International Medical and Milestone Scientific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Milestone Scientific and Meihua International 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 Meihua International Medical are associated (or correlated) with Milestone Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Milestone Scientific has no effect on the direction of Meihua International i.e., Meihua International and Milestone Scientific go up and down completely randomly.

Pair Corralation between Meihua International and Milestone Scientific

Given the investment horizon of 90 days Meihua International Medical is expected to under-perform the Milestone Scientific. In addition to that, Meihua International is 1.58 times more volatile than Milestone Scientific. It trades about -0.07 of its total potential returns per unit of risk. Milestone Scientific is currently generating about 0.02 per unit of volatility. If you would invest  101.00  in Milestone Scientific on September 2, 2024 and sell it today you would lose (2.00) from holding Milestone Scientific or give up 1.98% of portfolio value over 90 days.

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

Meihua International Medical  vs.  Milestone Scientific

Meihua International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Meihua International Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Milestone Scientific

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Milestone Scientific are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Milestone Scientific is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Meihua International and Milestone Scientific

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

The idea behind Meihua International Medical and Milestone Scientific 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.