Correlation Between Utah Medical and Meihua International

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

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

Diversification Opportunities for Utah Medical and Meihua International

-0.12

Correlation Coefficient

Utah Medical  Meihua International

Good diversification

The 3 months correlation between Utah and Meihua is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Utah Medical Products and Meihua International Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meihua International and Utah Medical 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 Utah Medical Products 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 Utah Medical i.e., Utah Medical and Meihua International go up and down completely randomly.

Pair Corralation between Utah Medical and Meihua International

Given the investment horizon of 90 days Utah Medical Products is expected to under-perform the Meihua International. But the stock apears to be less risky and, when comparing its historical volatility, Utah Medical Products is 4.08 times less risky than Meihua International. The stock trades about -0.12 of its potential returns per unit of risk. The Meihua International Medical is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  36.00  in Meihua International Medical on December 28, 2024 and sell it today you would lose (2.00) from holding Meihua International Medical or give up 5.56% of portfolio value over 90 days.

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

Utah Medical Products  vs.  Meihua International Medical

Utah Medical Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Utah Medical Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 Utah Medical and Meihua International

The main advantage of trading using opposite Utah Medical and Meihua International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Utah Medical 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 Utah Medical Products 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.