Correlation Between Zhongzhu Medical and Beijing Wandong

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

Diversification Opportunities for Zhongzhu Medical and Beijing Wandong

0.88

Correlation Coefficient

Zhongzhu Medical  Beijing Wandong

Very poor diversification

The 3 months correlation between Zhongzhu and Beijing is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Zhongzhu Medical Holdings and Beijing Wandong Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Wandong 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 Beijing Wandong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Wandong Medical has no effect on the direction of Zhongzhu Medical i.e., Zhongzhu Medical and Beijing Wandong go up and down completely randomly.

Pair Corralation between Zhongzhu Medical and Beijing Wandong

Assuming the 90 days trading horizon Zhongzhu Medical is expected to generate 1.5 times less return on investment than Beijing Wandong. But when comparing it to its historical volatility, Zhongzhu Medical Holdings is 1.09 times less risky than Beijing Wandong. It trades about 0.02 of its potential returns per unit of risk. Beijing Wandong Medical is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,509  in Beijing Wandong Medical on September 30, 2024 and sell it today you would earn a total of  44.00  from holding Beijing Wandong Medical or generate 2.92% return on investment over 90 days.

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

Zhongzhu Medical Holdings  vs.  Beijing Wandong 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.

Beijing Wandong Medical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Wandong Medical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Beijing Wandong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Zhongzhu Medical and Beijing Wandong

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

The idea behind Zhongzhu Medical Holdings and Beijing Wandong 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.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.