Correlation Between Hubei Tech and Healthcare

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

Diversification Opportunities for Hubei Tech and Healthcare

0.67
  Correlation Coefficient

Poor diversification

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

Pair Corralation between Hubei Tech and Healthcare

Assuming the 90 days trading horizon Hubei Tech Semiconductors is expected to generate 1.6 times more return on investment than Healthcare. However, Hubei Tech is 1.6 times more volatile than Healthcare Co. It trades about 0.11 of its potential returns per unit of risk. Healthcare Co is currently generating about 0.09 per unit of risk. If you would invest  3,234  in Hubei Tech Semiconductors on November 8, 2024 and sell it today you would earn a total of  165.00  from holding Hubei Tech Semiconductors or generate 5.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Hubei Tech Semiconductors  vs.  Healthcare Co

 Performance 
       Timeline  
Hubei Tech Semiconductors 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Hubei Tech Semiconductors has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Healthcare 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Healthcare Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Hubei Tech and Healthcare Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hubei Tech and Healthcare

The main advantage of trading using opposite Hubei Tech and Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hubei Tech position performs unexpectedly, 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 Healthcare will offset losses from the drop in Healthcare's long position.
The idea behind Hubei Tech Semiconductors and Healthcare Co 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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