Correlation Between China Securities and Maider Medical

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Can any of the company-specific risk be diversified away by investing in both China Securities and Maider Medical 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 Securities and Maider Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Securities 800 and Maider Medical Industry, you can compare the effects of market volatilities on China Securities and Maider Medical 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 Securities with a short position of Maider Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Securities and Maider Medical.

Diversification Opportunities for China Securities and Maider Medical

0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between China and Maider is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding China Securities 800 and Maider Medical Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maider Medical Industry and China Securities 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 Securities 800 are associated (or correlated) with Maider Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maider Medical Industry has no effect on the direction of China Securities i.e., China Securities and Maider Medical go up and down completely randomly.
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Pair Corralation between China Securities and Maider Medical

Assuming the 90 days trading horizon China Securities 800 is expected to generate 0.34 times more return on investment than Maider Medical. However, China Securities 800 is 2.95 times less risky than Maider Medical. It trades about 0.04 of its potential returns per unit of risk. Maider Medical Industry is currently generating about -0.08 per unit of risk. If you would invest  378,267  in China Securities 800 on September 5, 2024 and sell it today you would earn a total of  46,901  from holding China Securities 800 or generate 12.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

China Securities 800  vs.  Maider Medical Industry

 Performance 
       Timeline  

China Securities and Maider Medical Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with China Securities and Maider Medical

The main advantage of trading using opposite China Securities and Maider Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Securities position performs unexpectedly, Maider Medical 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 Maider Medical will offset losses from the drop in Maider Medical's long position.
The idea behind China Securities 800 and Maider Medical Industry 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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