Correlation Between U Ming and CHC Healthcare
Can any of the company-specific risk be diversified away by investing in both U Ming and CHC Healthcare 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 U Ming and CHC Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between U Ming Marine Transport and CHC Healthcare Group, you can compare the effects of market volatilities on U Ming and CHC Healthcare 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 U Ming with a short position of CHC Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Ming and CHC Healthcare.
Diversification Opportunities for U Ming and CHC Healthcare
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 2606 and CHC is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding U Ming Marine Transport and CHC Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHC Healthcare Group and U Ming 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 U Ming Marine Transport are associated (or correlated) with CHC Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHC Healthcare Group has no effect on the direction of U Ming i.e., U Ming and CHC Healthcare go up and down completely randomly.
Pair Corralation between U Ming and CHC Healthcare
Assuming the 90 days trading horizon U Ming Marine Transport is expected to under-perform the CHC Healthcare. In addition to that, U Ming is 2.07 times more volatile than CHC Healthcare Group. It trades about -0.04 of its total potential returns per unit of risk. CHC Healthcare Group is currently generating about 0.16 per unit of volatility. If you would invest 4,315 in CHC Healthcare Group on November 6, 2024 and sell it today you would earn a total of 115.00 from holding CHC Healthcare Group or generate 2.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
U Ming Marine Transport vs. CHC Healthcare Group
Performance |
| Timeline |
| U Ming Marine |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| CHC Healthcare Group |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
U Ming and CHC Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with U Ming and CHC Healthcare
The main advantage of trading using opposite U Ming and CHC Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if U Ming position performs unexpectedly, CHC Healthcare 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 CHC Healthcare will offset losses from the drop in CHC Healthcare's long position.The idea behind U Ming Marine Transport and CHC Healthcare Group 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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