Correlation Between Gansu Huangtai and Shanghai Pharmaceuticals

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

By analyzing existing cross correlation between Gansu Huangtai Wine marketing and Shanghai Pharmaceuticals Holding, you can compare the effects of market volatilities on Gansu Huangtai and Shanghai Pharmaceuticals 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 Gansu Huangtai with a short position of Shanghai Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gansu Huangtai and Shanghai Pharmaceuticals.

Diversification Opportunities for Gansu Huangtai and Shanghai Pharmaceuticals

0.67

Correlation Coefficient

Gansu Huangtai  Shanghai Pharmaceuticals

Poor diversification

The 3 months correlation between Gansu and Shanghai is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Huangtai Wine marketing and Shanghai Pharmaceuticals Holdi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Pharmaceuticals and Gansu Huangtai 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 Gansu Huangtai Wine marketing are associated (or correlated) with Shanghai Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Pharmaceuticals has no effect on the direction of Gansu Huangtai i.e., Gansu Huangtai and Shanghai Pharmaceuticals go up and down completely randomly.

Pair Corralation between Gansu Huangtai and Shanghai Pharmaceuticals

Assuming the 90 days trading horizon Gansu Huangtai Wine marketing is expected to generate 3.28 times more return on investment than Shanghai Pharmaceuticals. However, Gansu Huangtai is 3.28 times more volatile than Shanghai Pharmaceuticals Holding. It trades about -0.06 of its potential returns per unit of risk. Shanghai Pharmaceuticals Holding is currently generating about -0.23 per unit of risk. If you would invest  1,507  in Gansu Huangtai Wine marketing on December 25, 2024 and sell it today you would lose (204.00) from holding Gansu Huangtai Wine marketing or give up 13.54% of portfolio value over 90 days.

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

Gansu Huangtai Wine marketing  vs.  Shanghai Pharmaceuticals Holdi

Gansu Huangtai Wine

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gansu Huangtai Wine marketing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Shanghai Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shanghai Pharmaceuticals Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Gansu Huangtai and Shanghai Pharmaceuticals

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

The idea behind Gansu Huangtai Wine marketing and Shanghai Pharmaceuticals Holding 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.