Correlation Between Precision Optics, and Meihua International

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

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

Diversification Opportunities for Precision Optics, and Meihua International

-0.19

Correlation Coefficient

Precision Optics,  Meihua International

Good diversification

The 3 months correlation between Precision and Meihua is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Precision Optics, and Meihua International Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meihua International and Precision Optics, 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 Precision Optics, 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 Precision Optics, i.e., Precision Optics, and Meihua International go up and down completely randomly.

Pair Corralation between Precision Optics, and Meihua International

Given the investment horizon of 90 days Precision Optics, is expected to under-perform the Meihua International. But the stock apears to be less risky and, when comparing its historical volatility, Precision Optics, is 1.2 times less risky than Meihua International. The stock trades about -0.08 of its potential returns per unit of risk. The Meihua International Medical is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  36.00  in Meihua International Medical on December 30, 2024 and sell it today you would lose (3.00) from holding Meihua International Medical or give up 8.33% of portfolio value over 90 days.

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

Precision Optics,  vs.  Meihua International Medical

Precision Optics,

Risk-Adjusted Performance

Very Weak

Over the last 90 days Precision Optics, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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 Precision Optics, and Meihua International

The main advantage of trading using opposite Precision Optics, and Meihua International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precision Optics, 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 Precision Optics, 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.