Correlation Between China Health and CTR Investments

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

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

Diversification Opportunities for China Health and CTR Investments

0.3

Correlation Coefficient

China Health  CTR Investments

Weak diversification

The 3 months correlation between China and CTR is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding China Health Management and CTR Investments Consulting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTR Investments Cons and China Health 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 China Health Management are associated (or correlated) with CTR Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTR Investments Cons has no effect on the direction of China Health i.e., China Health and CTR Investments go up and down completely randomly.

Pair Corralation between China Health and CTR Investments

Given the investment horizon of 90 days China Health is expected to generate 2.15 times less return on investment than CTR Investments. But when comparing it to its historical volatility, China Health Management is 1.46 times less risky than CTR Investments. It trades about 0.05 of its potential returns per unit of risk. CTR Investments Consulting is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.08  in CTR Investments Consulting on September 27, 2024 and sell it today you would lose (0.06) from holding CTR Investments Consulting or give up 75.0% of portfolio value over 90 days.

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

China Health Management  vs.  CTR Investments Consulting

China Health Management

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Health Management are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical indicators, China Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CTR Investments Cons

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CTR Investments Consulting has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with China Health and CTR Investments

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

The idea behind China Health Management and CTR Investments Consulting 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.