Correlation Between Changzhou Evergreen and Cansino Biologics

Can any of the company-specific risk be diversified away by investing in both Changzhou Evergreen and Cansino Biologics 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 Changzhou Evergreen and Cansino Biologics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Changzhou Evergreen Technology and Cansino Biologics, you can compare the effects of market volatilities on Changzhou Evergreen and Cansino Biologics 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 Changzhou Evergreen with a short position of Cansino Biologics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changzhou Evergreen and Cansino Biologics.

Diversification Opportunities for Changzhou Evergreen and Cansino Biologics

0.67

Correlation Coefficient

Changzhou Evergreen  Cansino Biologics

Poor diversification

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

Pair Corralation between Changzhou Evergreen and Cansino Biologics

Assuming the 90 days trading horizon Changzhou Evergreen Technology is expected to generate 1.21 times more return on investment than Cansino Biologics. However, Changzhou Evergreen is 1.21 times more volatile than Cansino Biologics. It trades about 0.06 of its potential returns per unit of risk. Cansino Biologics is currently generating about -0.02 per unit of risk. If you would invest  1,742  in Changzhou Evergreen Technology on December 27, 2024 and sell it today you would earn a total of  117.00  from holding Changzhou Evergreen Technology or generate 6.72% return on investment over 90 days.

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

Changzhou Evergreen Technology  vs.  Cansino Biologics

Changzhou Evergreen

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Changzhou Evergreen Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changzhou Evergreen may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Cansino Biologics

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Changzhou Evergreen and Cansino Biologics

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

The idea behind Changzhou Evergreen Technology and Cansino Biologics 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.