Correlation Between CHC Healthcare and Chinese Maritime
Can any of the company-specific risk be diversified away by investing in both CHC Healthcare and Chinese Maritime 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 CHC Healthcare and Chinese Maritime into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHC Healthcare Group and Chinese Maritime Transport, you can compare the effects of market volatilities on CHC Healthcare and Chinese Maritime 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 CHC Healthcare with a short position of Chinese Maritime. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHC Healthcare and Chinese Maritime.
Diversification Opportunities for CHC Healthcare and Chinese Maritime
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CHC and Chinese is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding CHC Healthcare Group and Chinese Maritime Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chinese Maritime Tra and CHC Healthcare 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 CHC Healthcare Group are associated (or correlated) with Chinese Maritime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chinese Maritime Tra has no effect on the direction of CHC Healthcare i.e., CHC Healthcare and Chinese Maritime go up and down completely randomly.
Pair Corralation between CHC Healthcare and Chinese Maritime
Assuming the 90 days trading horizon CHC Healthcare Group is expected to generate 0.93 times more return on investment than Chinese Maritime. However, CHC Healthcare Group is 1.07 times less risky than Chinese Maritime. It trades about 0.16 of its potential returns per unit of risk. Chinese Maritime Transport is currently generating about -0.28 per unit of risk. 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHC Healthcare Group vs. Chinese Maritime Transport
Performance |
| Timeline |
| CHC Healthcare Group |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
| Chinese Maritime Tra |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
CHC Healthcare and Chinese Maritime Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHC Healthcare and Chinese Maritime
The main advantage of trading using opposite CHC Healthcare and Chinese Maritime positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHC Healthcare position performs unexpectedly, Chinese Maritime 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 Chinese Maritime will offset losses from the drop in Chinese Maritime's long position.The idea behind CHC Healthcare Group and Chinese Maritime Transport 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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