Correlation Between Huatian Hotel and Shenzhen Mindray

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

By analyzing existing cross correlation between Huatian Hotel Group and Shenzhen Mindray Bio Medical, you can compare the effects of market volatilities on Huatian Hotel and Shenzhen Mindray 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 Huatian Hotel with a short position of Shenzhen Mindray. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huatian Hotel and Shenzhen Mindray.

Diversification Opportunities for Huatian Hotel and Shenzhen Mindray

0.8

Correlation Coefficient

Huatian Hotel  Shenzhen Mindray

Very poor diversification

The 3 months correlation between Huatian and Shenzhen is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Huatian Hotel Group and Shenzhen Mindray Bio Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Mindray Bio and Huatian Hotel 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 Huatian Hotel Group are associated (or correlated) with Shenzhen Mindray. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Mindray Bio has no effect on the direction of Huatian Hotel i.e., Huatian Hotel and Shenzhen Mindray go up and down completely randomly.

Pair Corralation between Huatian Hotel and Shenzhen Mindray

Assuming the 90 days trading horizon Huatian Hotel Group is expected to generate 0.91 times more return on investment than Shenzhen Mindray. However, Huatian Hotel Group is 1.1 times less risky than Shenzhen Mindray. It trades about 0.12 of its potential returns per unit of risk. Shenzhen Mindray Bio Medical is currently generating about 0.05 per unit of risk. If you would invest  297.00  in Huatian Hotel Group on September 4, 2024 and sell it today you would earn a total of  62.00  from holding Huatian Hotel Group or generate 20.88% return on investment over 90 days.

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

Huatian Hotel Group  vs.  Shenzhen Mindray Bio Medical

Huatian Hotel Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Huatian Hotel Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huatian Hotel sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen Mindray Bio

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Mindray Bio Medical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Mindray may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Huatian Hotel and Shenzhen Mindray

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

The idea behind Huatian Hotel Group and Shenzhen Mindray Bio 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.