Correlation Between Pro Dex and Meihua International

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

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

Diversification Opportunities for Pro Dex and Meihua International

0.08

Correlation Coefficient

Pro Dex  Meihua International

Significant diversification

The 3 months correlation between Pro and Meihua is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Pro Dex and Meihua International Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meihua International and Pro Dex 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 Pro Dex are associated (or correlated) with Meihua International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meihua International has no effect on the direction of Pro Dex i.e., Pro Dex and Meihua International go up and down completely randomly.

Pair Corralation between Pro Dex and Meihua International

Given the investment horizon of 90 days Pro Dex is expected to generate 1.55 times more return on investment than Meihua International. However, Pro Dex is 1.55 times more volatile than Meihua International Medical. It trades about 0.03 of its potential returns per unit of risk. Meihua International Medical is currently generating about 0.01 per unit of risk. If you would invest  4,930  in Pro Dex on December 27, 2024 and sell it today you would earn a total of  52.00  from holding Pro Dex or generate 1.05% return on investment over 90 days.

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

Pro Dex  vs.  Meihua International Medical

Pro Dex

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pro Dex are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Pro Dex may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Meihua International

Risk-Adjusted Performance

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 somewhat strong basic indicators, Meihua International is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pro Dex and Meihua International

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

The idea behind Pro Dex and Meihua International Medical 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..