Correlation Between Healthcare and China Merchants
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By analyzing existing cross correlation between Healthcare Co and China Merchants Bank, you can compare the effects of market volatilities on Healthcare and China Merchants 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 Healthcare with a short position of China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Healthcare and China Merchants.
Diversification Opportunities for Healthcare and China Merchants
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Healthcare and China is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Co and China Merchants Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Merchants Bank and 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 Healthcare Co are associated (or correlated) with China Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Merchants Bank has no effect on the direction of Healthcare i.e., Healthcare and China Merchants go up and down completely randomly.
Pair Corralation between Healthcare and China Merchants
Assuming the 90 days trading horizon Healthcare Co is expected to generate 2.68 times more return on investment than China Merchants. However, Healthcare is 2.68 times more volatile than China Merchants Bank. It trades about 0.27 of its potential returns per unit of risk. China Merchants Bank is currently generating about -0.26 per unit of risk. If you would invest 626.00 in Healthcare Co on September 3, 2024 and sell it today you would earn a total of 113.00 from holding Healthcare Co or generate 18.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Healthcare Co vs. China Merchants Bank
Performance |
| Timeline |
| Healthcare |
| China Merchants Bank |
Healthcare and China Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Healthcare and China Merchants
The main advantage of trading using opposite Healthcare and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Healthcare position performs unexpectedly, China Merchants 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 China Merchants will offset losses from the drop in China Merchants' long position.| Healthcare vs. PetroChina Co Ltd | Healthcare vs. China Mobile Limited | Healthcare vs. Industrial and Commercial | Healthcare vs. China Life Insurance |
| China Merchants vs. Hainan Mining Co | China Merchants vs. Shengda Mining Co | China Merchants vs. Jonjee Hi tech Industrial | China Merchants vs. Tianjin Hi Tech Development |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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