Correlation Between China Health and Bellatora

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

Diversification Opportunities for China Health and Bellatora

0.04

Correlation Coefficient

China Health  Bellatora

Significant diversification

The 3 months correlation between China and Bellatora is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding China Health Management and Bellatora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bellatora 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 Bellatora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bellatora has no effect on the direction of China Health i.e., China Health and Bellatora go up and down completely randomly.

Pair Corralation between China Health and Bellatora

Given the investment horizon of 90 days China Health is expected to generate 22.45 times less return on investment than Bellatora. But when comparing it to its historical volatility, China Health Management is 4.55 times less risky than Bellatora. It trades about 0.03 of its potential returns per unit of risk. Bellatora is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  43.00  in Bellatora on September 27, 2024 and sell it today you would earn a total of  13.00  from holding Bellatora or generate 30.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

China Health Management  vs.  Bellatora

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.

Bellatora

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bellatora are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal technical and fundamental indicators, Bellatora reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Health and Bellatora

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

The idea behind China Health Management and Bellatora 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.