Correlation Between Defence Therapeutics and Sino Biopharmaceutica

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

By analyzing existing cross correlation between Defence Therapeutics and Sino Biopharmaceutical Limited, you can compare the effects of market volatilities on Defence Therapeutics and Sino Biopharmaceutica 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 Defence Therapeutics with a short position of Sino Biopharmaceutica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Defence Therapeutics and Sino Biopharmaceutica.

Diversification Opportunities for Defence Therapeutics and Sino Biopharmaceutica

0.1

Correlation Coefficient

Defence Therapeutics  Sino Biopharmaceutica

Average diversification

The 3 months correlation between Defence and Sino is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Defence Therapeutics and Sino Biopharmaceutical Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sino Biopharmaceutical and Defence Therapeutics 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 Defence Therapeutics are associated (or correlated) with Sino Biopharmaceutica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sino Biopharmaceutical has no effect on the direction of Defence Therapeutics i.e., Defence Therapeutics and Sino Biopharmaceutica go up and down completely randomly.

Pair Corralation between Defence Therapeutics and Sino Biopharmaceutica

Assuming the 90 days horizon Defence Therapeutics is expected to generate 2.68 times less return on investment than Sino Biopharmaceutica. But when comparing it to its historical volatility, Defence Therapeutics is 1.04 times less risky than Sino Biopharmaceutica. It trades about 0.03 of its potential returns per unit of risk. Sino Biopharmaceutical Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  38.00  in Sino Biopharmaceutical Limited on September 16, 2024 and sell it today you would earn a total of  4.00  from holding Sino Biopharmaceutical Limited or generate 10.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

Defence Therapeutics  vs.  Sino Biopharmaceutical Limited

Defence Therapeutics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Defence Therapeutics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Defence Therapeutics is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Sino Biopharmaceutical

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sino Biopharmaceutical Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Sino Biopharmaceutica may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Defence Therapeutics and Sino Biopharmaceutica

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

The idea behind Defence Therapeutics and Sino Biopharmaceutical Limited 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..