Correlation Between Hunan Nanling and HOB Biotech

Can any of the company-specific risk be diversified away by investing in both Hunan Nanling and HOB Biotech 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 Hunan Nanling and HOB Biotech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hunan Nanling Industrial and HOB Biotech Group, you can compare the effects of market volatilities on Hunan Nanling and HOB Biotech 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 Hunan Nanling with a short position of HOB Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan Nanling and HOB Biotech.

Diversification Opportunities for Hunan Nanling and HOB Biotech

-0.13

Correlation Coefficient

Hunan Nanling  HOB Biotech

Good diversification

The 3 months correlation between Hunan and HOB is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Nanling Industrial and HOB Biotech Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOB Biotech Group and Hunan Nanling 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 Hunan Nanling Industrial are associated (or correlated) with HOB Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HOB Biotech Group has no effect on the direction of Hunan Nanling i.e., Hunan Nanling and HOB Biotech go up and down completely randomly.

Pair Corralation between Hunan Nanling and HOB Biotech

Assuming the 90 days trading horizon Hunan Nanling Industrial is expected to generate 0.59 times more return on investment than HOB Biotech. However, Hunan Nanling Industrial is 1.69 times less risky than HOB Biotech. It trades about -0.22 of its potential returns per unit of risk. HOB Biotech Group is currently generating about -0.31 per unit of risk. If you would invest  1,257  in Hunan Nanling Industrial on October 7, 2024 and sell it today you would lose (119.00) from holding Hunan Nanling Industrial or give up 9.47% of portfolio value over 90 days.

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

Hunan Nanling Industrial  vs.  HOB Biotech Group

Hunan Nanling Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hunan Nanling Industrial 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

HOB Biotech Group

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HOB Biotech Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HOB Biotech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hunan Nanling and HOB Biotech

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

The idea behind Hunan Nanling Industrial and HOB Biotech Group 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.