Correlation Between Shenzhen Bioeasy and Guangdong Marubi

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

By analyzing existing cross correlation between Shenzhen Bioeasy Biotechnology and Guangdong Marubi Biotechnology, you can compare the effects of market volatilities on Shenzhen Bioeasy and Guangdong Marubi 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 Shenzhen Bioeasy with a short position of Guangdong Marubi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Bioeasy and Guangdong Marubi.

Diversification Opportunities for Shenzhen Bioeasy and Guangdong Marubi

0.84

Correlation Coefficient

Shenzhen Bioeasy  Guangdong Marubi

Very poor diversification

The 3 months correlation between Shenzhen and Guangdong is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Bioeasy Biotechnology and Guangdong Marubi Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Marubi Bio and Shenzhen Bioeasy 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 Shenzhen Bioeasy Biotechnology are associated (or correlated) with Guangdong Marubi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Marubi Bio has no effect on the direction of Shenzhen Bioeasy i.e., Shenzhen Bioeasy and Guangdong Marubi go up and down completely randomly.

Pair Corralation between Shenzhen Bioeasy and Guangdong Marubi

Assuming the 90 days trading horizon Shenzhen Bioeasy Biotechnology is expected to generate 1.66 times more return on investment than Guangdong Marubi. However, Shenzhen Bioeasy is 1.66 times more volatile than Guangdong Marubi Biotechnology. It trades about 0.16 of its potential returns per unit of risk. Guangdong Marubi Biotechnology is currently generating about 0.2 per unit of risk. If you would invest  666.00  in Shenzhen Bioeasy Biotechnology on September 3, 2024 and sell it today you would earn a total of  322.00  from holding Shenzhen Bioeasy Biotechnology or generate 48.35% return on investment over 90 days.

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

Shenzhen Bioeasy Biotechnology  vs.  Guangdong Marubi Biotechnology

Shenzhen Bioeasy Bio

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Bioeasy Biotechnology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Bioeasy sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangdong Marubi Bio

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Marubi Biotechnology are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Marubi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Bioeasy and Guangdong Marubi

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

The idea behind Shenzhen Bioeasy Biotechnology and Guangdong Marubi Biotechnology 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.