Correlation Between Sino Biopharmaceutica and PureTech Health

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

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

Diversification Opportunities for Sino Biopharmaceutica and PureTech Health

0.53

Correlation Coefficient

Sino Biopharmaceutica  PureTech Health

Very weak diversification

The 3 months correlation between Sino and PureTech is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Sino Biopharmaceutical Limited and PureTech Health plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PureTech Health plc and Sino Biopharmaceutica 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 Sino Biopharmaceutical Limited are associated (or correlated) with PureTech Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PureTech Health plc has no effect on the direction of Sino Biopharmaceutica i.e., Sino Biopharmaceutica and PureTech Health go up and down completely randomly.

Pair Corralation between Sino Biopharmaceutica and PureTech Health

Assuming the 90 days horizon Sino Biopharmaceutical Limited is expected to generate 1.98 times more return on investment than PureTech Health. However, Sino Biopharmaceutica is 1.98 times more volatile than PureTech Health plc. It trades about 0.01 of its potential returns per unit of risk. PureTech Health plc is currently generating about -0.05 per unit of risk. If you would invest  56.00  in Sino Biopharmaceutical Limited on September 4, 2024 and sell it today you would lose (11.00) from holding Sino Biopharmaceutical Limited or give up 19.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	12.38%
Values	Daily Returns

Sino Biopharmaceutical Limited  vs.  PureTech Health plc

Sino Biopharmaceutical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sino Biopharmaceutical Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical and fundamental indicators, Sino Biopharmaceutica reported solid returns over the last few months and may actually be approaching a breakup point.

PureTech Health plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PureTech Health plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, PureTech Health is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sino Biopharmaceutica and PureTech Health

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

The idea behind Sino Biopharmaceutical Limited and PureTech Health plc 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.