Correlation Between Allmed Medical and Hengkang Medical

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

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

Diversification Opportunities for Allmed Medical and Hengkang Medical

0.81

Correlation Coefficient

Allmed Medical  Hengkang Medical

Very poor diversification

The 3 months correlation between Allmed and Hengkang is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Allmed Medical Products and Hengkang Medical Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengkang Medical and Allmed 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 Allmed Medical Products are associated (or correlated) with Hengkang Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengkang Medical has no effect on the direction of Allmed Medical i.e., Allmed Medical and Hengkang Medical go up and down completely randomly.

Pair Corralation between Allmed Medical and Hengkang Medical

Assuming the 90 days trading horizon Allmed Medical is expected to generate 2.12 times less return on investment than Hengkang Medical. But when comparing it to its historical volatility, Allmed Medical Products is 1.37 times less risky than Hengkang Medical. It trades about 0.1 of its potential returns per unit of risk. Hengkang Medical Group is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  199.00  in Hengkang Medical Group on September 26, 2024 and sell it today you would earn a total of  74.00  from holding Hengkang Medical Group or generate 37.19% return on investment over 90 days.

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

Allmed Medical Products  vs.  Hengkang Medical Group

Allmed Medical Products

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Allmed Medical Products are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Allmed Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Hengkang Medical

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hengkang Medical Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hengkang Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allmed Medical and Hengkang Medical

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

The idea behind Allmed Medical Products and Hengkang Medical Group 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 Commodity Directory module to find actively traded commodities issued by global exchanges.