Correlation Between Double Medical and ZheJiang Haers

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

Diversification Opportunities for Double Medical and ZheJiang Haers

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Double and ZheJiang is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Double Medical Technology and ZheJiang Haers Vacuum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZheJiang Haers Vacuum and Double 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 Double Medical Technology are associated (or correlated) with ZheJiang Haers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZheJiang Haers Vacuum has no effect on the direction of Double Medical i.e., Double Medical and ZheJiang Haers go up and down completely randomly.

Pair Corralation between Double Medical and ZheJiang Haers

Assuming the 90 days trading horizon Double Medical is expected to generate 2.17 times less return on investment than ZheJiang Haers. But when comparing it to its historical volatility, Double Medical Technology is 1.2 times less risky than ZheJiang Haers. It trades about 0.02 of its potential returns per unit of risk. ZheJiang Haers Vacuum is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  664.00  in ZheJiang Haers Vacuum on September 12, 2024 and sell it today you would earn a total of  178.00  from holding ZheJiang Haers Vacuum or generate 26.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Double Medical Technology  vs.  ZheJiang Haers Vacuum

 Performance 
       Timeline  
Double Medical Technology 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Double Medical Technology are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Double Medical sustained solid returns over the last few months and may actually be approaching a breakup point.
ZheJiang Haers Vacuum 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in ZheJiang Haers Vacuum are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ZheJiang Haers sustained solid returns over the last few months and may actually be approaching a breakup point.

Double Medical and ZheJiang Haers Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Double Medical and ZheJiang Haers

The main advantage of trading using opposite Double Medical and ZheJiang Haers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Double Medical position performs unexpectedly, ZheJiang Haers 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 ZheJiang Haers will offset losses from the drop in ZheJiang Haers' long position.
The idea behind Double Medical Technology and ZheJiang Haers Vacuum 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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