Correlation Between Zhongchao and Healthcare Triangle

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

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

Diversification Opportunities for Zhongchao and Healthcare Triangle

0.68

Correlation Coefficient

Zhongchao  Healthcare Triangle

Poor diversification

The 3 months correlation between Zhongchao and Healthcare is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Zhongchao and Healthcare Triangle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare Triangle and Zhongchao 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 Zhongchao are associated (or correlated) with Healthcare Triangle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare Triangle has no effect on the direction of Zhongchao i.e., Zhongchao and Healthcare Triangle go up and down completely randomly.

Pair Corralation between Zhongchao and Healthcare Triangle

Given the investment horizon of 90 days Zhongchao is expected to under-perform the Healthcare Triangle. But the stock apears to be less risky and, when comparing its historical volatility, Zhongchao is 2.98 times less risky than Healthcare Triangle. The stock trades about -0.1 of its potential returns per unit of risk. The Healthcare Triangle is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  78.00  in Healthcare Triangle on December 22, 2024 and sell it today you would lose (41.00) from holding Healthcare Triangle or give up 52.56% of portfolio value over 90 days.

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

Zhongchao  vs.  Healthcare Triangle

Zhongchao

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zhongchao has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Healthcare Triangle

Risk-Adjusted Performance

Very Weak

Over the last 90 days Healthcare Triangle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic 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.

Pair Trading with Zhongchao and Healthcare Triangle

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

The idea behind Zhongchao and Healthcare Triangle 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.