Correlation Between Singhe Hospitals and National Development

Can any of the company-specific risk be diversified away by investing in both Singhe Hospitals and National Development 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 Singhe Hospitals and National Development into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Singhe Hospitals and National Development Bank, you can compare the effects of market volatilities on Singhe Hospitals and National Development 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 Singhe Hospitals with a short position of National Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Singhe Hospitals and National Development.

Diversification Opportunities for Singhe Hospitals and National Development

0.89

Correlation Coefficient

Singhe Hospitals  National Development

Very poor diversification

The 3 months correlation between Singhe and National is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Singhe Hospitals and National Development Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Development Bank and Singhe Hospitals 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 Singhe Hospitals are associated (or correlated) with National Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Development Bank has no effect on the direction of Singhe Hospitals i.e., Singhe Hospitals and National Development go up and down completely randomly.

Pair Corralation between Singhe Hospitals and National Development

Assuming the 90 days trading horizon Singhe Hospitals is expected to generate 1.32 times more return on investment than National Development. However, Singhe Hospitals is 1.32 times more volatile than National Development Bank. It trades about -0.05 of its potential returns per unit of risk. National Development Bank is currently generating about -0.25 per unit of risk. If you would invest  290.00  in Singhe Hospitals on December 5, 2024 and sell it today you would lose (10.00) from holding Singhe Hospitals or give up 3.45% of portfolio value over 90 days.

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

Singhe Hospitals  vs.  National Development Bank

Singhe Hospitals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Singhe Hospitals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Singhe Hospitals sustained solid returns over the last few months and may actually be approaching a breakup point.

National Development Bank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in National Development Bank are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, National Development sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Singhe Hospitals and National Development

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

The idea behind Singhe Hospitals and National Development Bank 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.