Correlation Between PKU HealthCare and Shenyang Chemical

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

By analyzing existing cross correlation between PKU HealthCare Corp and Shenyang Chemical Industry, you can compare the effects of market volatilities on PKU HealthCare and Shenyang Chemical 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 PKU HealthCare with a short position of Shenyang Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of PKU HealthCare and Shenyang Chemical.

Diversification Opportunities for PKU HealthCare and Shenyang Chemical

0.94

Correlation Coefficient

PKU HealthCare  Shenyang Chemical

Almost no diversification

The 3 months correlation between PKU and Shenyang is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding PKU HealthCare Corp and Shenyang Chemical Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenyang Chemical and PKU HealthCare 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 PKU HealthCare Corp are associated (or correlated) with Shenyang Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenyang Chemical has no effect on the direction of PKU HealthCare i.e., PKU HealthCare and Shenyang Chemical go up and down completely randomly.

Pair Corralation between PKU HealthCare and Shenyang Chemical

Assuming the 90 days trading horizon PKU HealthCare Corp is expected to generate 0.81 times more return on investment than Shenyang Chemical. However, PKU HealthCare Corp is 1.24 times less risky than Shenyang Chemical. It trades about 0.0 of its potential returns per unit of risk. Shenyang Chemical Industry is currently generating about -0.01 per unit of risk. If you would invest  737.00  in PKU HealthCare Corp on September 19, 2024 and sell it today you would lose (109.00) from holding PKU HealthCare Corp or give up 14.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.79%
Values	Daily Returns

PKU HealthCare Corp  vs.  Shenyang Chemical Industry

PKU HealthCare Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PKU HealthCare Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PKU HealthCare sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenyang Chemical

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shenyang Chemical Industry are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenyang Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PKU HealthCare and Shenyang Chemical

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

The idea behind PKU HealthCare Corp and Shenyang Chemical Industry 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.

Check out your portfolio center.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.