Correlation Between China Medicine and Northern Graphite
Can any of the company-specific risk be diversified away by investing in both China Medicine and Northern Graphite 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 China Medicine and Northern Graphite into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Medicine and Northern Graphite, you can compare the effects of market volatilities on China Medicine and Northern Graphite 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 China Medicine with a short position of Northern Graphite. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Medicine and Northern Graphite.
Diversification Opportunities for China Medicine and Northern Graphite
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Northern is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding China Medicine and Northern Graphite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Graphite and China Medicine 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 China Medicine are associated (or correlated) with Northern Graphite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Graphite has no effect on the direction of China Medicine i.e., China Medicine and Northern Graphite go up and down completely randomly.
Pair Corralation between China Medicine and Northern Graphite
If you would invest 6.60 in Northern Graphite on September 1, 2024 and sell it today you would lose (0.80) from holding Northern Graphite or give up 12.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
China Medicine vs. Northern Graphite
Performance |
| Timeline |
| China Medicine |
| Northern Graphite |
China Medicine and Northern Graphite Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Medicine and Northern Graphite
The main advantage of trading using opposite China Medicine and Northern Graphite positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Medicine position performs unexpectedly, Northern Graphite 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 Northern Graphite will offset losses from the drop in Northern Graphite's long position.| China Medicine vs. Cardinal Health | China Medicine vs. Henry Schein | China Medicine vs. Owens Minor | China Medicine vs. Patterson Companies |
| Northern Graphite vs. South32 Limited | Northern Graphite vs. NioCorp Developments Ltd | Northern Graphite vs. HUMANA INC | Northern Graphite vs. SCOR PK |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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