Correlation Between Xiandai Investment and Shanghai Junshi

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

By analyzing existing cross correlation between Xiandai Investment Co and Shanghai Junshi Biosciences, you can compare the effects of market volatilities on Xiandai Investment and Shanghai Junshi 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 Xiandai Investment with a short position of Shanghai Junshi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiandai Investment and Shanghai Junshi.

Diversification Opportunities for Xiandai Investment and Shanghai Junshi

0.33

Correlation Coefficient

Xiandai Investment  Shanghai Junshi

Weak diversification

The 3 months correlation between Xiandai and Shanghai is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Xiandai Investment Co and Shanghai Junshi Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Junshi Bios and Xiandai Investment 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 Xiandai Investment Co are associated (or correlated) with Shanghai Junshi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Junshi Bios has no effect on the direction of Xiandai Investment i.e., Xiandai Investment and Shanghai Junshi go up and down completely randomly.

Pair Corralation between Xiandai Investment and Shanghai Junshi

Assuming the 90 days trading horizon Xiandai Investment Co is expected to under-perform the Shanghai Junshi. But the stock apears to be less risky and, when comparing its historical volatility, Xiandai Investment Co is 1.93 times less risky than Shanghai Junshi. The stock trades about -0.08 of its potential returns per unit of risk. The Shanghai Junshi Biosciences is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,811  in Shanghai Junshi Biosciences on December 25, 2024 and sell it today you would earn a total of  89.00  from holding Shanghai Junshi Biosciences or generate 3.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Xiandai Investment Co  vs.  Shanghai Junshi Biosciences

Xiandai Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xiandai Investment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Xiandai Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shanghai Junshi Bios

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Junshi Biosciences are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shanghai Junshi is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Xiandai Investment and Shanghai Junshi

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

The idea behind Xiandai Investment Co and Shanghai Junshi Biosciences 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.