Correlation Between USA Recycling and China Health

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

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

Diversification Opportunities for USA Recycling and China Health

0.59

Correlation Coefficient

USA Recycling  China Health

Very weak diversification

The 3 months correlation between USA and China is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding USA Recycling Industries and China Health Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Health Management and USA Recycling 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 USA Recycling Industries are associated (or correlated) with China Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Health Management has no effect on the direction of USA Recycling i.e., USA Recycling and China Health go up and down completely randomly.

Pair Corralation between USA Recycling and China Health

Given the investment horizon of 90 days USA Recycling Industries is expected to under-perform the China Health. In addition to that, USA Recycling is 1.77 times more volatile than China Health Management. It trades about -0.12 of its total potential returns per unit of risk. China Health Management is currently generating about 0.0 per unit of volatility. If you would invest  0.41  in China Health Management on September 30, 2024 and sell it today you would lose (0.06) from holding China Health Management or give up 14.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

USA Recycling Industries  vs.  China Health Management

USA Recycling Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days USA Recycling Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

China Health Management

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days China Health Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, China Health is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with USA Recycling and China Health

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

The idea behind USA Recycling Industries and China Health Management 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.