Correlation Between China Health and Forwardly

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

Diversification Opportunities for China Health and Forwardly

0.15

Correlation Coefficient

China Health  Forwardly

Average diversification

The 3 months correlation between China and Forwardly is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding China Health Management and Forwardly in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forwardly 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 Forwardly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forwardly has no effect on the direction of China Health i.e., China Health and Forwardly go up and down completely randomly.

Pair Corralation between China Health and Forwardly

Given the investment horizon of 90 days China Health Management is expected to generate 1.53 times more return on investment than Forwardly. However, China Health is 1.53 times more volatile than Forwardly. It trades about 0.05 of its potential returns per unit of risk. Forwardly is currently generating about 0.03 per unit of risk. If you would invest  1.54  in China Health Management on September 25, 2024 and sell it today you would lose (1.14) from holding China Health Management or give up 74.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

China Health Management  vs.  Forwardly

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 abnormal technical indicators, China Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Forwardly

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Forwardly are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Forwardly showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Health and Forwardly

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

The idea behind China Health Management and Forwardly 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..