Correlation Between Jinhe Biotechnology and Hangzhou Prevail

Can any of the company-specific risk be diversified away by investing in both Jinhe Biotechnology and Hangzhou Prevail 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 Prevail 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 Prevail Optoelectronic, you can compare the effects of market volatilities on Jinhe Biotechnology and Hangzhou Prevail 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 Prevail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jinhe Biotechnology and Hangzhou Prevail.

Diversification Opportunities for Jinhe Biotechnology and Hangzhou Prevail

0.82

Correlation Coefficient

Jinhe Biotechnology  Hangzhou Prevail

Very poor diversification

The 3 months correlation between Jinhe and Hangzhou is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Jinhe Biotechnology Co and Hangzhou Prevail Optoelectroni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Prevail Opt 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 Prevail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Prevail Opt has no effect on the direction of Jinhe Biotechnology i.e., Jinhe Biotechnology and Hangzhou Prevail go up and down completely randomly.

Pair Corralation between Jinhe Biotechnology and Hangzhou Prevail

Assuming the 90 days trading horizon Jinhe Biotechnology is expected to generate 2.63 times less return on investment than Hangzhou Prevail. But when comparing it to its historical volatility, Jinhe Biotechnology Co is 1.68 times less risky than Hangzhou Prevail. It trades about 0.02 of its potential returns per unit of risk. Hangzhou Prevail Optoelectronic is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,696  in Hangzhou Prevail Optoelectronic on December 1, 2024 and sell it today you would earn a total of  20.00  from holding Hangzhou Prevail Optoelectronic or generate 1.18% return on investment over 90 days.

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

Jinhe Biotechnology Co  vs.  Hangzhou Prevail Optoelectroni

Jinhe Biotechnology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jinhe Biotechnology Co has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Prevail Opt

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hangzhou Prevail Optoelectronic 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 Jinhe Biotechnology and Hangzhou Prevail

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

The idea behind Jinhe Biotechnology Co and Hangzhou Prevail Optoelectronic 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.