Correlation Between Chengdu Spaceon and Healthcare

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

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

Diversification Opportunities for Chengdu Spaceon and Healthcare

0.74

Correlation Coefficient

Chengdu Spaceon  Healthcare

Poor diversification

The 3 months correlation between Chengdu and Healthcare is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Chengdu Spaceon Electronics and Healthcare Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare and Chengdu Spaceon 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 Chengdu Spaceon Electronics are associated (or correlated) with Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare has no effect on the direction of Chengdu Spaceon i.e., Chengdu Spaceon and Healthcare go up and down completely randomly.

Pair Corralation between Chengdu Spaceon and Healthcare

Assuming the 90 days trading horizon Chengdu Spaceon Electronics is expected to generate 0.8 times more return on investment than Healthcare. However, Chengdu Spaceon Electronics is 1.25 times less risky than Healthcare. It trades about 0.17 of its potential returns per unit of risk. Healthcare Co is currently generating about -0.01 per unit of risk. If you would invest  1,572  in Chengdu Spaceon Electronics on September 28, 2024 and sell it today you would earn a total of  126.00  from holding Chengdu Spaceon Electronics or generate 8.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Chengdu Spaceon Electronics  vs.  Healthcare Co

Chengdu Spaceon Elec

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chengdu Spaceon Electronics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chengdu Spaceon sustained solid returns over the last few months and may actually be approaching a breakup point.

Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Healthcare Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Healthcare is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chengdu Spaceon and Healthcare

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

The idea behind Chengdu Spaceon Electronics and Healthcare Co 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.