Correlation Between Jinhe Biotechnology and Hangzhou Gaoxin

Can any of the company-specific risk be diversified away by investing in both Jinhe Biotechnology and Hangzhou Gaoxin 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 Jinhe Biotechnology and Hangzhou Gaoxin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jinhe Biotechnology Co and Hangzhou Gaoxin Rubber, you can compare the effects of market volatilities on Jinhe Biotechnology and Hangzhou Gaoxin 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 Jinhe Biotechnology with a short position of Hangzhou Gaoxin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jinhe Biotechnology and Hangzhou Gaoxin.

Diversification Opportunities for Jinhe Biotechnology and Hangzhou Gaoxin

0.69

Correlation Coefficient

Jinhe Biotechnology  Hangzhou Gaoxin

Poor diversification

The 3 months correlation between Jinhe and Hangzhou is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Jinhe Biotechnology Co and Hangzhou Gaoxin Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Gaoxin Rubber and Jinhe Biotechnology 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 Jinhe Biotechnology Co are associated (or correlated) with Hangzhou Gaoxin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Gaoxin Rubber has no effect on the direction of Jinhe Biotechnology i.e., Jinhe Biotechnology and Hangzhou Gaoxin go up and down completely randomly.

Pair Corralation between Jinhe Biotechnology and Hangzhou Gaoxin

Assuming the 90 days trading horizon Jinhe Biotechnology Co is expected to generate 0.56 times more return on investment than Hangzhou Gaoxin. However, Jinhe Biotechnology Co is 1.78 times less risky than Hangzhou Gaoxin. It trades about -0.19 of its potential returns per unit of risk. Hangzhou Gaoxin Rubber is currently generating about -0.18 per unit of risk. If you would invest  465.00  in Jinhe Biotechnology Co on October 11, 2024 and sell it today you would lose (50.00) from holding Jinhe Biotechnology Co or give up 10.75% of portfolio value over 90 days.

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

Jinhe Biotechnology Co  vs.  Hangzhou Gaoxin Rubber

Jinhe Biotechnology

Risk-Adjusted Performance

2 of 100

Weak

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

Hangzhou Gaoxin Rubber

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Jinhe Biotechnology and Hangzhou Gaoxin

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

The idea behind Jinhe Biotechnology Co and Hangzhou Gaoxin Rubber 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.