Correlation Between Huadong Medicine and New China
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By analyzing existing cross correlation between Huadong Medicine Co and New China Life, you can compare the effects of market volatilities on Huadong Medicine and New China 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 Huadong Medicine with a short position of New China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huadong Medicine and New China.
Diversification Opportunities for Huadong Medicine and New China
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Huadong and New is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Huadong Medicine Co and New China Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New China Life and Huadong Medicine 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 Huadong Medicine Co are associated (or correlated) with New China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New China Life has no effect on the direction of Huadong Medicine i.e., Huadong Medicine and New China go up and down completely randomly.
Pair Corralation between Huadong Medicine and New China
Assuming the 90 days trading horizon Huadong Medicine Co is expected to generate 0.85 times more return on investment than New China. However, Huadong Medicine Co is 1.17 times less risky than New China. It trades about 0.2 of its potential returns per unit of risk. New China Life is currently generating about 0.13 per unit of risk. If you would invest 3,280 in Huadong Medicine Co on November 7, 2024 and sell it today you would earn a total of 200.00 from holding Huadong Medicine Co or generate 6.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Huadong Medicine Co vs. New China Life
Performance |
| Timeline |
| Huadong Medicine |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| New China Life |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Huadong Medicine and New China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Huadong Medicine and New China
The main advantage of trading using opposite Huadong Medicine and New China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huadong Medicine position performs unexpectedly, New China 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 New China will offset losses from the drop in New China's long position.The idea behind Huadong Medicine Co and New China Life 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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