Correlation Between Pharming Group and Sino Biopharmaceutica

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

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

Diversification Opportunities for Pharming Group and Sino Biopharmaceutica

0.44

Correlation Coefficient

Pharming Group  Sino Biopharmaceutica

Very weak diversification

The 3 months correlation between Pharming and Sino is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Pharming Group NV and Sino Biopharmaceutical Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sino Biopharmaceutical and Pharming Group 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 Pharming Group NV 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 Pharming Group i.e., Pharming Group and Sino Biopharmaceutica go up and down completely randomly.

Pair Corralation between Pharming Group and Sino Biopharmaceutica

Assuming the 90 days horizon Pharming Group is expected to generate 10.84 times less return on investment than Sino Biopharmaceutica. But when comparing it to its historical volatility, Pharming Group NV is 1.28 times less risky than Sino Biopharmaceutica. It trades about 0.01 of its potential returns per unit of risk. Sino Biopharmaceutical Ltd is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  800.00  in Sino Biopharmaceutical Ltd on September 13, 2024 and sell it today you would earn a total of  105.00  from holding Sino Biopharmaceutical Ltd or generate 13.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Pharming Group NV  vs.  Sino Biopharmaceutical Ltd

Pharming Group NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pharming Group NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Pharming Group 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

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sino Biopharmaceutical Ltd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain primary indicators, Sino Biopharmaceutica showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pharming Group and Sino Biopharmaceutica

The main advantage of trading using opposite Pharming Group and Sino Biopharmaceutica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pharming Group 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 Pharming Group NV and Sino Biopharmaceutical Ltd 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.