Correlation Between China Medical and OPERA SOFTWARE

Can any of the company-specific risk be diversified away by investing in both China Medical and OPERA SOFTWARE 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 OPERA SOFTWARE 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 OPERA SOFTWARE, you can compare the effects of market volatilities on China Medical and OPERA SOFTWARE 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 OPERA SOFTWARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Medical and OPERA SOFTWARE.

Diversification Opportunities for China Medical and OPERA SOFTWARE

0.93

Correlation Coefficient

China Medical  OPERA SOFTWARE

Almost no diversification

The 3 months correlation between China and OPERA is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding China Medical System and OPERA SOFTWARE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OPERA SOFTWARE 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 OPERA SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OPERA SOFTWARE has no effect on the direction of China Medical i.e., China Medical and OPERA SOFTWARE go up and down completely randomly.

Pair Corralation between China Medical and OPERA SOFTWARE

Assuming the 90 days trading horizon China Medical System is expected to generate 1.29 times more return on investment than OPERA SOFTWARE. However, China Medical is 1.29 times more volatile than OPERA SOFTWARE. It trades about 0.29 of its potential returns per unit of risk. OPERA SOFTWARE is currently generating about 0.32 per unit of risk. If you would invest  88.00  in China Medical System on April 20, 2025 and sell it today you would earn a total of  57.00  from holding China Medical System or generate 64.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

China Medical System  vs.  OPERA SOFTWARE

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 22 (%) 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.

OPERA SOFTWARE

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in OPERA SOFTWARE are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, OPERA SOFTWARE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Medical and OPERA SOFTWARE

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

The idea behind China Medical System and OPERA SOFTWARE 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.