Correlation Between Ming Yang and HOB Biotech

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

By analyzing existing cross correlation between Ming Yang Smart and HOB Biotech Group, you can compare the effects of market volatilities on Ming Yang and HOB Biotech 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 Ming Yang with a short position of HOB Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ming Yang and HOB Biotech.

Diversification Opportunities for Ming Yang and HOB Biotech

0.82

Correlation Coefficient

Ming Yang  HOB Biotech

Very poor diversification

The 3 months correlation between Ming and HOB is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Ming Yang Smart and HOB Biotech Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOB Biotech Group and Ming Yang 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 Ming Yang Smart are associated (or correlated) with HOB Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HOB Biotech Group has no effect on the direction of Ming Yang i.e., Ming Yang and HOB Biotech go up and down completely randomly.

Pair Corralation between Ming Yang and HOB Biotech

Assuming the 90 days trading horizon Ming Yang is expected to generate 3.04 times less return on investment than HOB Biotech. But when comparing it to its historical volatility, Ming Yang Smart is 2.25 times less risky than HOB Biotech. It trades about 0.28 of its potential returns per unit of risk. HOB Biotech Group is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  2,254  in HOB Biotech Group on September 14, 2024 and sell it today you would earn a total of  8,891  from holding HOB Biotech Group or generate 394.45% return on investment over 90 days.

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

Ming Yang Smart  vs.  HOB Biotech Group

Ming Yang Smart

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ming Yang Smart are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ming Yang sustained solid returns over the last few months and may actually be approaching a breakup point.

HOB Biotech Group

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in HOB Biotech Group are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HOB Biotech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ming Yang and HOB Biotech

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

The idea behind Ming Yang Smart and HOB Biotech Group 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.