Correlation Between Meihua International and Pro Dex

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

Diversification Opportunities for Meihua International and Pro Dex

-0.8

Correlation Coefficient

Meihua International  Pro Dex

Pay attention - limited upside

The 3 months correlation between Meihua and Pro is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Meihua International Medical and Pro Dex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pro Dex 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 Pro Dex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pro Dex has no effect on the direction of Meihua International i.e., Meihua International and Pro Dex go up and down completely randomly.

Pair Corralation between Meihua International and Pro Dex

Given the investment horizon of 90 days Meihua International Medical is expected to under-perform the Pro Dex. In addition to that, Meihua International is 1.46 times more volatile than Pro Dex. It trades about -0.07 of its total potential returns per unit of risk. Pro Dex is currently generating about 0.26 per unit of volatility. If you would invest  2,233  in Pro Dex on August 31, 2024 and sell it today you would earn a total of  2,866  from holding Pro Dex or generate 128.35% return on investment over 90 days.

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

Meihua International Medical  vs.  Pro Dex

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pro Dex

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pro Dex are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Pro Dex showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Meihua International and Pro Dex

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

The idea behind Meihua International Medical and Pro Dex 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.