Correlation Between Hengkang Medical and Suzhou Douson

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

Diversification Opportunities for Hengkang Medical and Suzhou Douson

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between Hengkang and Suzhou is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Hengkang Medical Group and Suzhou Douson Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou Douson Drilling and Hengkang Medical 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 Hengkang Medical Group are associated (or correlated) with Suzhou Douson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou Douson Drilling has no effect on the direction of Hengkang Medical i.e., Hengkang Medical and Suzhou Douson go up and down completely randomly.

Pair Corralation between Hengkang Medical and Suzhou Douson

Assuming the 90 days trading horizon Hengkang Medical Group is expected to under-perform the Suzhou Douson. In addition to that, Hengkang Medical is 1.19 times more volatile than Suzhou Douson Drilling. It trades about -0.07 of its total potential returns per unit of risk. Suzhou Douson Drilling is currently generating about -0.07 per unit of volatility. If you would invest  2,523  in Suzhou Douson Drilling on October 8, 2024 and sell it today you would lose (168.00) from holding Suzhou Douson Drilling or give up 6.66% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Hengkang Medical Group  vs.  Suzhou Douson Drilling

 Performance 
       Timeline  
Hengkang Medical 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Hengkang Medical Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hengkang Medical may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Suzhou Douson Drilling 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Douson Drilling are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Suzhou Douson sustained solid returns over the last few months and may actually be approaching a breakup point.

Hengkang Medical and Suzhou Douson Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hengkang Medical and Suzhou Douson

The main advantage of trading using opposite Hengkang Medical and Suzhou Douson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hengkang Medical position performs unexpectedly, Suzhou Douson 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 Suzhou Douson will offset losses from the drop in Suzhou Douson's long position.
The idea behind Hengkang Medical Group and Suzhou Douson Drilling 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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