Correlation Between China Medical and CSL

Can any of the company-specific risk be diversified away by investing in both China Medical and CSL 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 Medical and CSL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Medical System and CSL Limited, you can compare the effects of market volatilities on China Medical and CSL 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 Medical with a short position of CSL. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Medical and CSL.

Diversification Opportunities for China Medical and CSL

-0.15

Correlation Coefficient

China Medical  CSL

Good diversification

The 3 months correlation between China and CSL is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding China Medical System and CSL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL Limited and China 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 China Medical System are associated (or correlated) with CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL Limited has no effect on the direction of China Medical i.e., China Medical and CSL go up and down completely randomly.

Pair Corralation between China Medical and CSL

Assuming the 90 days trading horizon China Medical System is expected to generate 1.76 times more return on investment than CSL. However, China Medical is 1.76 times more volatile than CSL Limited. It trades about 0.23 of its potential returns per unit of risk. CSL Limited is currently generating about 0.07 per unit of risk. If you would invest  96.00  in China Medical System on April 24, 2025 and sell it today you would earn a total of  45.00  from holding China Medical System or generate 46.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

China Medical System  vs.  CSL Limited

China Medical System

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in China Medical System are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Medical reported solid returns over the last few months and may actually be approaching a breakup point.

CSL Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CSL Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, CSL may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with China Medical and CSL

The main advantage of trading using opposite China Medical and CSL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Medical position performs unexpectedly, CSL 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 CSL will offset losses from the drop in CSL's long position.

The idea behind China Medical System and CSL Limited 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.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..