Correlation Between Xiandai Investment and CareRay Digital

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

By analyzing existing cross correlation between Xiandai Investment Co and CareRay Digital Medical, you can compare the effects of market volatilities on Xiandai Investment and CareRay Digital 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 Xiandai Investment with a short position of CareRay Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiandai Investment and CareRay Digital.

Diversification Opportunities for Xiandai Investment and CareRay Digital

0.92

Correlation Coefficient

Xiandai Investment  CareRay Digital

Almost no diversification

The 3 months correlation between Xiandai and CareRay is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Xiandai Investment Co and CareRay Digital Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareRay Digital Medical and Xiandai Investment 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 Xiandai Investment Co are associated (or correlated) with CareRay Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareRay Digital Medical has no effect on the direction of Xiandai Investment i.e., Xiandai Investment and CareRay Digital go up and down completely randomly.

Pair Corralation between Xiandai Investment and CareRay Digital

Assuming the 90 days trading horizon Xiandai Investment is expected to generate 1.36 times less return on investment than CareRay Digital. But when comparing it to its historical volatility, Xiandai Investment Co is 1.31 times less risky than CareRay Digital. It trades about 0.23 of its potential returns per unit of risk. CareRay Digital Medical is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,042  in CareRay Digital Medical on September 12, 2024 and sell it today you would earn a total of  549.00  from holding CareRay Digital Medical or generate 52.69% return on investment over 90 days.

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

Xiandai Investment Co  vs.  CareRay Digital Medical

Xiandai Investment

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xiandai Investment Co are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiandai Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

CareRay Digital Medical

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CareRay Digital Medical are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CareRay Digital sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xiandai Investment and CareRay Digital

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

The idea behind Xiandai Investment Co and CareRay Digital 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.