Correlation Between Innovative Medical and Zhonghong Pulin

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

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

Diversification Opportunities for Innovative Medical and Zhonghong Pulin

0.6

Correlation Coefficient

Innovative Medical  Zhonghong Pulin

Poor diversification

The 3 months correlation between Innovative and Zhonghong is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Innovative Medical Management and Zhonghong Pulin Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhonghong Pulin Medical and Innovative 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 Innovative Medical Management are associated (or correlated) with Zhonghong Pulin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhonghong Pulin Medical has no effect on the direction of Innovative Medical i.e., Innovative Medical and Zhonghong Pulin go up and down completely randomly.

Pair Corralation between Innovative Medical and Zhonghong Pulin

Assuming the 90 days trading horizon Innovative Medical Management is expected to generate 1.03 times more return on investment than Zhonghong Pulin. However, Innovative Medical is 1.03 times more volatile than Zhonghong Pulin Medical. It trades about 0.09 of its potential returns per unit of risk. Zhonghong Pulin Medical is currently generating about 0.04 per unit of risk. If you would invest  756.00  in Innovative Medical Management on September 29, 2024 and sell it today you would earn a total of  152.00  from holding Innovative Medical Management or generate 20.11% return on investment over 90 days.

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

Innovative Medical Management  vs.  Zhonghong Pulin Medical

Innovative Medical

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Innovative Medical Management are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Innovative Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhonghong Pulin Medical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhonghong Pulin Medical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhonghong Pulin may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Innovative Medical and Zhonghong Pulin

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

The idea behind Innovative Medical Management and Zhonghong Pulin 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.