Correlation Between Ambarella and Concord Medical

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

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

Diversification Opportunities for Ambarella and Concord Medical

0.23

Correlation Coefficient

Ambarella  Concord Medical

Modest diversification

The 3 months correlation between Ambarella and Concord is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ambarella and Concord Medical Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Concord Medical Services and Ambarella 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 Ambarella are associated (or correlated) with Concord Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Concord Medical Services has no effect on the direction of Ambarella i.e., Ambarella and Concord Medical go up and down completely randomly.

Pair Corralation between Ambarella and Concord Medical

Given the investment horizon of 90 days Ambarella is expected to under-perform the Concord Medical. But the stock apears to be less risky and, when comparing its historical volatility, Ambarella is 1.87 times less risky than Concord Medical. The stock trades about -0.02 of its potential returns per unit of risk. The Concord Medical Services is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  149.00  in Concord Medical Services on January 19, 2024 and sell it today you would lose (90.70) from holding Concord Medical Services or give up 60.87% of portfolio value over 90 days.

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

Ambarella  vs.  Concord Medical Services

Ambarella

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ambarella has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Concord Medical Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Concord Medical Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Ambarella and Concord Medical

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

The idea behind Ambarella and Concord Medical Services 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.