Correlation Between Opthea and China Pharma

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

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

Diversification Opportunities for Opthea and China Pharma

0.76

Correlation Coefficient

Opthea  China Pharma

Poor diversification

The 3 months correlation between Opthea and China is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Opthea and China Pharma Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Pharma Holdings and Opthea 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 Opthea are associated (or correlated) with China Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Pharma Holdings has no effect on the direction of Opthea i.e., Opthea and China Pharma go up and down completely randomly.

Pair Corralation between Opthea and China Pharma

Considering the 90-day investment horizon Opthea is expected to generate 0.94 times more return on investment than China Pharma. However, Opthea is 1.07 times less risky than China Pharma. It trades about -0.16 of its potential returns per unit of risk. China Pharma Holdings is currently generating about -0.25 per unit of risk. If you would invest  434.00  in Opthea on September 2, 2024 and sell it today you would lose (65.00) from holding Opthea or give up 14.98% of portfolio value over 90 days.

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

Opthea  vs.  China Pharma Holdings

Opthea

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Opthea are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Opthea unveiled solid returns over the last few months and may actually be approaching a breakup point.

China Pharma Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Pharma Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical indicators, China Pharma demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Opthea and China Pharma

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

The idea behind Opthea and China Pharma Holdings 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.