Correlation Between Shenzhen Zhongzhuang and CareRay Digital

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

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

Diversification Opportunities for Shenzhen Zhongzhuang and CareRay Digital

0.78

Correlation Coefficient

Shenzhen Zhongzhuang  CareRay Digital

Poor diversification

The 3 months correlation between Shenzhen and CareRay is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Zhongzhuang Construct 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 Shenzhen Zhongzhuang 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 Shenzhen Zhongzhuang Construction 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 Shenzhen Zhongzhuang i.e., Shenzhen Zhongzhuang and CareRay Digital go up and down completely randomly.

Pair Corralation between Shenzhen Zhongzhuang and CareRay Digital

Assuming the 90 days trading horizon Shenzhen Zhongzhuang Construction is expected to generate 0.96 times more return on investment than CareRay Digital. However, Shenzhen Zhongzhuang Construction is 1.04 times less risky than CareRay Digital. It trades about 0.43 of its potential returns per unit of risk. CareRay Digital Medical is currently generating about 0.21 per unit of risk. If you would invest  185.00  in Shenzhen Zhongzhuang Construction on September 5, 2024 and sell it today you would earn a total of  216.00  from holding Shenzhen Zhongzhuang Construction or generate 116.76% return on investment over 90 days.

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

Shenzhen Zhongzhuang Construct  vs.  CareRay Digital Medical

Shenzhen Zhongzhuang

Risk-Adjusted Performance

33 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Zhongzhuang Construction are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Zhongzhuang sustained solid returns over the last few months and may actually be approaching a breakup point.

CareRay Digital Medical

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CareRay Digital Medical are ranked lower than 16 (%) 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 Shenzhen Zhongzhuang and CareRay Digital

The main advantage of trading using opposite Shenzhen Zhongzhuang and CareRay Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenzhen Zhongzhuang 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 Shenzhen Zhongzhuang Construction 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.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..