Correlation Between Great China and United Orthopedic
Can any of the company-specific risk be diversified away by investing in both Great China and United Orthopedic 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 Great China and United Orthopedic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great China Metal and United Orthopedic, you can compare the effects of market volatilities on Great China and United Orthopedic 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 Great China with a short position of United Orthopedic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great China and United Orthopedic.
Diversification Opportunities for Great China and United Orthopedic
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Great and United is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Great China Metal and United Orthopedic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Orthopedic and Great China 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 Great China Metal are associated (or correlated) with United Orthopedic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Orthopedic has no effect on the direction of Great China i.e., Great China and United Orthopedic go up and down completely randomly.
Pair Corralation between Great China and United Orthopedic
Assuming the 90 days trading horizon Great China is expected to generate 1.46 times less return on investment than United Orthopedic. But when comparing it to its historical volatility, Great China Metal is 2.53 times less risky than United Orthopedic. It trades about 0.34 of its potential returns per unit of risk. United Orthopedic is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 9,280 in United Orthopedic on November 8, 2024 and sell it today you would earn a total of 220.00 from holding United Orthopedic or generate 2.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 93.75% |
| Values | Daily Returns |
Great China Metal vs. United Orthopedic
Performance |
| Timeline |
| Great China Metal |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| United Orthopedic |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Great China and United Orthopedic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great China and United Orthopedic
The main advantage of trading using opposite Great China and United Orthopedic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great China position performs unexpectedly, United Orthopedic 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 United Orthopedic will offset losses from the drop in United Orthopedic's long position.The idea behind Great China Metal and United Orthopedic 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum |