Correlation Between Shandong Sinoglory and PKU HealthCare

Can any of the company-specific risk be diversified away by investing in both Shandong Sinoglory and PKU HealthCare 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 Shandong Sinoglory and PKU HealthCare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shandong Sinoglory Health and PKU HealthCare Corp, you can compare the effects of market volatilities on Shandong Sinoglory and PKU HealthCare 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 Shandong Sinoglory with a short position of PKU HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Sinoglory and PKU HealthCare.

Diversification Opportunities for Shandong Sinoglory and PKU HealthCare

0.93

Correlation Coefficient

Shandong Sinoglory  PKU HealthCare

Almost no diversification

The 3 months correlation between Shandong and PKU is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Sinoglory Health and PKU HealthCare Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PKU HealthCare Corp and Shandong Sinoglory 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 Shandong Sinoglory Health are associated (or correlated) with PKU HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PKU HealthCare Corp has no effect on the direction of Shandong Sinoglory i.e., Shandong Sinoglory and PKU HealthCare go up and down completely randomly.

Pair Corralation between Shandong Sinoglory and PKU HealthCare

Assuming the 90 days trading horizon Shandong Sinoglory is expected to generate 1.61 times less return on investment than PKU HealthCare. But when comparing it to its historical volatility, Shandong Sinoglory Health is 1.15 times less risky than PKU HealthCare. It trades about 0.11 of its potential returns per unit of risk. PKU HealthCare Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  531.00  in PKU HealthCare Corp on September 24, 2024 and sell it today you would earn a total of  149.00  from holding PKU HealthCare Corp or generate 28.06% return on investment over 90 days.

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

Shandong Sinoglory Health  vs.  PKU HealthCare Corp

Shandong Sinoglory Health

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Sinoglory Health are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Sinoglory sustained solid returns over the last few months and may actually be approaching a breakup point.

PKU HealthCare Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PKU HealthCare Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PKU HealthCare sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shandong Sinoglory and PKU HealthCare

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

The idea behind Shandong Sinoglory Health and PKU HealthCare Corp 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.