Correlation Between Definitive Healthcare and China Eastern

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

By analyzing existing cross correlation between Definitive Healthcare Corp and China Eastern Airlines, you can compare the effects of market volatilities on Definitive Healthcare and China Eastern 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 Definitive Healthcare with a short position of China Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Definitive Healthcare and China Eastern.

Diversification Opportunities for Definitive Healthcare and China Eastern

-0.04

Correlation Coefficient

Definitive Healthcare  China Eastern

Good diversification

The 11 months correlation between Definitive and China is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Definitive Healthcare Corp and China Eastern Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Eastern Airlines and Definitive Healthcare 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 Definitive Healthcare Corp are associated (or correlated) with China Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Eastern Airlines has no effect on the direction of Definitive Healthcare i.e., Definitive Healthcare and China Eastern go up and down completely randomly.

Pair Corralation between Definitive Healthcare and China Eastern

If you would invest  1,998  in China Eastern Airlines on January 30, 2024 and sell it today you would earn a total of  0.00  from holding China Eastern Airlines or generate 0.0% return on investment over 90 days.

Time Period	11 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

Definitive Healthcare Corp  vs.  China Eastern Airlines

Definitive Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Definitive Healthcare Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

China Eastern Airlines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Eastern Airlines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, China Eastern is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Definitive Healthcare and China Eastern

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

The idea behind Definitive Healthcare Corp and China Eastern Airlines 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.