Correlation Between China Health and New Generation
Can any of the company-specific risk be diversified away by investing in both China Health and New Generation 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 Health and New Generation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Health Management and New Generation Consumer, you can compare the effects of market volatilities on China Health and New Generation 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 Health with a short position of New Generation. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Health and New Generation.
Diversification Opportunities for China Health and New Generation
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and New is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding China Health Management and New Generation Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Generation Consumer and China Health 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 Health Management are associated (or correlated) with New Generation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Generation Consumer has no effect on the direction of China Health i.e., China Health and New Generation go up and down completely randomly.
Pair Corralation between China Health and New Generation
Given the investment horizon of 90 days China Health is expected to generate 2.02 times less return on investment than New Generation. But when comparing it to its historical volatility, China Health Management is 1.72 times less risky than New Generation. It trades about 0.05 of its potential returns per unit of risk. New Generation Consumer is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 0.08 in New Generation Consumer on August 29, 2024 and sell it today you would lose (0.01) from holding New Generation Consumer or give up 12.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Health Management vs. New Generation Consumer
Performance |
| Timeline |
| China Health Management |
| New Generation Consumer |
China Health and New Generation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Health and New Generation
The main advantage of trading using opposite China Health and New Generation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Health position performs unexpectedly, New Generation 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 New Generation will offset losses from the drop in New Generation's long position.| China Health vs. HeartCore Enterprises | China Health vs. Trust Stamp | China Health vs. Quhuo | China Health vs. C3 Ai Inc |
| New Generation vs. Green Planet Bio | New Generation vs. Azure Holding Group | New Generation vs. Four Leaf Acquisition | New Generation vs. Opus Magnum Ameris |
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.
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