Correlation Between Shenzhen Mindray and BlueFocus Communication

Can any of the company-specific risk be diversified away by investing in both Shenzhen Mindray and BlueFocus Communication 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 BlueFocus Communication 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 BlueFocus Communication Group, you can compare the effects of market volatilities on Shenzhen Mindray and BlueFocus Communication 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 BlueFocus Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Mindray and BlueFocus Communication.

Diversification Opportunities for Shenzhen Mindray and BlueFocus Communication

0.45

Correlation Coefficient

Shenzhen Mindray  BlueFocus Communication

Very weak diversification

The 3 months correlation between Shenzhen and BlueFocus is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Mindray Bio Medical and BlueFocus Communication Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueFocus Communication 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 BlueFocus Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlueFocus Communication has no effect on the direction of Shenzhen Mindray i.e., Shenzhen Mindray and BlueFocus Communication go up and down completely randomly.

Pair Corralation between Shenzhen Mindray and BlueFocus Communication

Assuming the 90 days trading horizon Shenzhen Mindray is expected to generate 5.56 times less return on investment than BlueFocus Communication. But when comparing it to its historical volatility, Shenzhen Mindray Bio Medical is 1.86 times less risky than BlueFocus Communication. It trades about 0.08 of its potential returns per unit of risk. BlueFocus Communication Group is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  525.00  in BlueFocus Communication Group on September 13, 2024 and sell it today you would earn a total of  628.00  from holding BlueFocus Communication Group or generate 119.62% return on investment over 90 days.

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

Shenzhen Mindray Bio Medical  vs.  BlueFocus Communication Group

Shenzhen Mindray Bio

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Mindray Bio Medical are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Mindray sustained solid returns over the last few months and may actually be approaching a breakup point.

BlueFocus Communication

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BlueFocus Communication Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BlueFocus Communication sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Mindray and BlueFocus Communication

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

The idea behind Shenzhen Mindray Bio Medical and BlueFocus Communication 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..