Correlation Between Meihua International and InspireMD

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

Diversification Opportunities for Meihua International and InspireMD

-0.42

Correlation Coefficient

Meihua International  InspireMD

Very good diversification

The 3 months correlation between Meihua and InspireMD is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Meihua International Medical and InspireMD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InspireMD 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 InspireMD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InspireMD has no effect on the direction of Meihua International i.e., Meihua International and InspireMD go up and down completely randomly.

Pair Corralation between Meihua International and InspireMD

Given the investment horizon of 90 days Meihua International Medical is expected to under-perform the InspireMD. In addition to that, Meihua International is 1.59 times more volatile than InspireMD. It trades about -0.04 of its total potential returns per unit of risk. InspireMD is currently generating about 0.06 per unit of volatility. If you would invest  112.00  in InspireMD on October 11, 2024 and sell it today you would earn a total of  165.00  from holding InspireMD or generate 147.32% return on investment over 90 days.

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

Meihua International Medical  vs.  InspireMD

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 abnormal performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

InspireMD

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in InspireMD are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, InspireMD may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Meihua International and InspireMD

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

The idea behind Meihua International Medical and InspireMD 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.