Correlation Between SAFETY MEDICAL and CHINA HUARONG
Can any of the company-specific risk be diversified away by investing in both SAFETY MEDICAL and CHINA HUARONG 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 SAFETY MEDICAL and CHINA HUARONG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SAFETY MEDICAL PROD and CHINA HUARONG ENERHD 50, you can compare the effects of market volatilities on SAFETY MEDICAL and CHINA HUARONG 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 SAFETY MEDICAL with a short position of CHINA HUARONG. Check out your portfolio center. Please also check ongoing floating volatility patterns of SAFETY MEDICAL and CHINA HUARONG.
Diversification Opportunities for SAFETY MEDICAL and CHINA HUARONG
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between SAFETY and CHINA is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding SAFETY MEDICAL PROD and CHINA HUARONG ENERHD 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA HUARONG ENERHD and SAFETY MEDICAL 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 SAFETY MEDICAL PROD are associated (or correlated) with CHINA HUARONG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA HUARONG ENERHD has no effect on the direction of SAFETY MEDICAL i.e., SAFETY MEDICAL and CHINA HUARONG go up and down completely randomly.
Pair Corralation between SAFETY MEDICAL and CHINA HUARONG
Assuming the 90 days trading horizon SAFETY MEDICAL PROD is expected to under-perform the CHINA HUARONG. But the stock apears to be less risky and, when comparing its historical volatility, SAFETY MEDICAL PROD is 6.06 times less risky than CHINA HUARONG. The stock trades about -0.36 of its potential returns per unit of risk. The CHINA HUARONG ENERHD 50 is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 0.20 in CHINA HUARONG ENERHD 50 on September 14, 2024 and sell it today you would lose (0.05) from holding CHINA HUARONG ENERHD 50 or give up 25.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SAFETY MEDICAL PROD vs. CHINA HUARONG ENERHD 50
Performance |
| Timeline |
| SAFETY MEDICAL PROD |
| CHINA HUARONG ENERHD |
SAFETY MEDICAL and CHINA HUARONG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SAFETY MEDICAL and CHINA HUARONG
The main advantage of trading using opposite SAFETY MEDICAL and CHINA HUARONG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SAFETY MEDICAL position performs unexpectedly, CHINA HUARONG 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 HUARONG will offset losses from the drop in CHINA HUARONG's long position.| SAFETY MEDICAL vs. Apple Inc | SAFETY MEDICAL vs. Apple Inc | SAFETY MEDICAL vs. Apple Inc | SAFETY MEDICAL vs. Apple Inc |
| CHINA HUARONG vs. Scandinavian Tobacco Group | CHINA HUARONG vs. Zoom Video Communications | CHINA HUARONG vs. WillScot Mobile Mini | CHINA HUARONG vs. Zurich Insurance Group |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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