Correlation Between Shenzhen Mindray and CareRay Digital

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

Diversification Opportunities for Shenzhen Mindray and CareRay Digital

0.81

Correlation Coefficient

Shenzhen Mindray  CareRay Digital

Very poor diversification

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

Pair Corralation between Shenzhen Mindray and CareRay Digital

Assuming the 90 days trading horizon Shenzhen Mindray Bio Medical is expected to under-perform the CareRay Digital. But the stock apears to be less risky and, when comparing its historical volatility, Shenzhen Mindray Bio Medical is 1.51 times less risky than CareRay Digital. The stock trades about -0.07 of its potential returns per unit of risk. The CareRay Digital Medical is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,400  in CareRay Digital Medical on August 31, 2024 and sell it today you would earn a total of  115.00  from holding CareRay Digital Medical or generate 8.21% return on investment over 90 days.

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

Shenzhen Mindray Bio Medical  vs.  CareRay Digital Medical

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 December 2024.

CareRay Digital Medical

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CareRay Digital Medical are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CareRay Digital sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Mindray and CareRay Digital

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

The idea behind Shenzhen Mindray Bio Medical and CareRay Digital Medical 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.