Correlation Between Shenzhen Mindray and Qingdao Choho

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

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

Diversification Opportunities for Shenzhen Mindray and Qingdao Choho

0.77

Correlation Coefficient

Shenzhen Mindray  Qingdao Choho

Poor diversification

The 3 months correlation between Shenzhen and Qingdao is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Mindray Bio Medical and Qingdao Choho Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qingdao Choho Industrial and Shenzhen Mindray 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 Mindray Bio Medical are associated (or correlated) with Qingdao Choho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qingdao Choho Industrial has no effect on the direction of Shenzhen Mindray i.e., Shenzhen Mindray and Qingdao Choho go up and down completely randomly.

Pair Corralation between Shenzhen Mindray and Qingdao Choho

Assuming the 90 days trading horizon Shenzhen Mindray is expected to generate 2.14 times less return on investment than Qingdao Choho. In addition to that, Shenzhen Mindray is 1.25 times more volatile than Qingdao Choho Industrial. It trades about 0.06 of its total potential returns per unit of risk. Qingdao Choho Industrial is currently generating about 0.15 per unit of volatility. If you would invest  2,227  in Qingdao Choho Industrial on September 2, 2024 and sell it today you would earn a total of  533.00  from holding Qingdao Choho Industrial or generate 23.93% return on investment over 90 days.

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

Shenzhen Mindray Bio Medical  vs.  Qingdao Choho Industrial

Shenzhen Mindray Bio

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Mindray Bio Medical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Mindray may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Qingdao Choho Industrial

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Shenzhen Mindray and Qingdao Choho

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

The idea behind Shenzhen Mindray Bio Medical and Qingdao Choho Industrial 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.