Correlation Between ScinoPharm Taiwan and Golden Biotechnology

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

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

Diversification Opportunities for ScinoPharm Taiwan and Golden Biotechnology

-0.23

Correlation Coefficient

ScinoPharm Taiwan  Golden Biotechnology

Very good diversification

The 3 months correlation between ScinoPharm and Golden is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding ScinoPharm Taiwan and Golden Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Biotechnology and ScinoPharm Taiwan 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 ScinoPharm Taiwan are associated (or correlated) with Golden Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Biotechnology has no effect on the direction of ScinoPharm Taiwan i.e., ScinoPharm Taiwan and Golden Biotechnology go up and down completely randomly.

Pair Corralation between ScinoPharm Taiwan and Golden Biotechnology

Assuming the 90 days trading horizon ScinoPharm Taiwan is expected to generate 0.34 times more return on investment than Golden Biotechnology. However, ScinoPharm Taiwan is 2.96 times less risky than Golden Biotechnology. It trades about -0.02 of its potential returns per unit of risk. Golden Biotechnology is currently generating about -0.03 per unit of risk. If you would invest  2,225  in ScinoPharm Taiwan on December 30, 2024 and sell it today you would lose (30.00) from holding ScinoPharm Taiwan or give up 1.35% of portfolio value over 90 days.

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

ScinoPharm Taiwan  vs.  Golden Biotechnology

ScinoPharm Taiwan

Risk-Adjusted Performance

Very Weak

Over the last 90 days ScinoPharm Taiwan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, ScinoPharm Taiwan is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Golden Biotechnology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Golden Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Golden Biotechnology is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with ScinoPharm Taiwan and Golden Biotechnology

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

The idea behind ScinoPharm Taiwan and Golden Biotechnology 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.