Correlation Between Zhongzhu Medical and Zhonghong Pulin

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

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

Diversification Opportunities for Zhongzhu Medical and Zhonghong Pulin

0.71

Correlation Coefficient

Zhongzhu Medical  Zhonghong Pulin

Poor diversification

The 3 months correlation between Zhongzhu and Zhonghong is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Zhongzhu Medical Holdings and Zhonghong Pulin Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhonghong Pulin Medical and Zhongzhu 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 Zhongzhu Medical Holdings are associated (or correlated) with Zhonghong Pulin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhonghong Pulin Medical has no effect on the direction of Zhongzhu Medical i.e., Zhongzhu Medical and Zhonghong Pulin go up and down completely randomly.

Pair Corralation between Zhongzhu Medical and Zhonghong Pulin

Assuming the 90 days trading horizon Zhongzhu Medical is expected to generate 2.72 times less return on investment than Zhonghong Pulin. But when comparing it to its historical volatility, Zhongzhu Medical Holdings is 1.73 times less risky than Zhonghong Pulin. It trades about 0.02 of its potential returns per unit of risk. Zhonghong Pulin Medical is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,294  in Zhonghong Pulin Medical on September 29, 2024 and sell it today you would earn a total of  48.00  from holding Zhonghong Pulin Medical or generate 3.71% return on investment over 90 days.

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

Zhongzhu Medical Holdings  vs.  Zhonghong Pulin Medical

Zhongzhu Medical Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongzhu Medical Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Zhongzhu Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Zhonghong Pulin Medical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhonghong Pulin Medical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhonghong Pulin may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Zhongzhu Medical and Zhonghong Pulin

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

The idea behind Zhongzhu Medical Holdings and Zhonghong Pulin 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.