Correlation Between Longmaster Information and Hengkang Medical

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

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

Diversification Opportunities for Longmaster Information and Hengkang Medical

0.87

Correlation Coefficient

Longmaster Information  Hengkang Medical

Very poor diversification

The 3 months correlation between Longmaster and Hengkang is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Longmaster Information Tech and Hengkang Medical Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengkang Medical and Longmaster Information 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 Longmaster Information Tech 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 Longmaster Information i.e., Longmaster Information and Hengkang Medical go up and down completely randomly.

Pair Corralation between Longmaster Information and Hengkang Medical

Assuming the 90 days trading horizon Longmaster Information is expected to generate 5.74 times less return on investment than Hengkang Medical. But when comparing it to its historical volatility, Longmaster Information Tech is 1.33 times less risky than Hengkang Medical. It trades about 0.02 of its potential returns per unit of risk. Hengkang Medical Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  270.00  in Hengkang Medical Group on September 30, 2024 and sell it today you would earn a total of  17.00  from holding Hengkang Medical Group or generate 6.3% return on investment over 90 days.

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

Longmaster Information Tech  vs.  Hengkang Medical Group

Longmaster Information

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Longmaster Information Tech are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Longmaster Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Hengkang Medical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hengkang Medical Group are ranked lower than 8 (%) 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 Longmaster Information and Hengkang Medical

The main advantage of trading using opposite Longmaster Information and Hengkang Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Longmaster Information 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 Longmaster Information Tech 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.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.