Correlation Between Orient Pharma and Chun Yuan

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

By analyzing existing cross correlation between Orient Pharma Co and Chun Yuan Steel, you can compare the effects of market volatilities on Orient Pharma and Chun Yuan 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 Orient Pharma with a short position of Chun Yuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orient Pharma and Chun Yuan.

Diversification Opportunities for Orient Pharma and Chun Yuan

-0.27

Correlation Coefficient

Orient Pharma  Chun Yuan

Very good diversification

The 3 months correlation between Orient and Chun is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Orient Pharma Co and Chun Yuan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chun Yuan Steel and Orient Pharma 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 Orient Pharma Co are associated (or correlated) with Chun Yuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chun Yuan Steel has no effect on the direction of Orient Pharma i.e., Orient Pharma and Chun Yuan go up and down completely randomly.

Pair Corralation between Orient Pharma and Chun Yuan

Assuming the 90 days trading horizon Orient Pharma Co is expected to generate 2.3 times more return on investment than Chun Yuan. However, Orient Pharma is 2.3 times more volatile than Chun Yuan Steel. It trades about 0.08 of its potential returns per unit of risk. Chun Yuan Steel is currently generating about -0.03 per unit of risk. If you would invest  2,695  in Orient Pharma Co on September 29, 2024 and sell it today you would earn a total of  895.00  from holding Orient Pharma Co or generate 33.21% return on investment over 90 days.

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

Orient Pharma Co  vs.  Chun Yuan Steel

Orient Pharma

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orient Pharma Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Orient Pharma showed solid returns over the last few months and may actually be approaching a breakup point.

Chun Yuan Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chun Yuan Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chun Yuan is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Orient Pharma and Chun Yuan

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

The idea behind Orient Pharma Co and Chun Yuan Steel 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.

Check out your portfolio center.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.