Correlation Between Healthcare and Mingchen Health

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

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

Diversification Opportunities for Healthcare and Mingchen Health

0.88

Correlation Coefficient

Healthcare  Mingchen Health

Very poor diversification

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

Pair Corralation between Healthcare and Mingchen Health

Assuming the 90 days trading horizon Healthcare Co is expected to generate 0.97 times more return on investment than Mingchen Health. However, Healthcare Co is 1.03 times less risky than Mingchen Health. It trades about 0.14 of its potential returns per unit of risk. Mingchen Health Co is currently generating about 0.12 per unit of risk. If you would invest  589.00  in Healthcare Co on September 5, 2024 and sell it today you would earn a total of  158.00  from holding Healthcare Co or generate 26.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.28%
Values	Daily Returns

Healthcare Co  vs.  Mingchen Health Co

Healthcare

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Healthcare Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Healthcare sustained solid returns over the last few months and may actually be approaching a breakup point.

Mingchen Health

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mingchen Health Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mingchen Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Healthcare and Mingchen Health

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

The idea behind Healthcare Co and Mingchen Health Co 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.