Correlation Between China Development and Onyx Healthcare

Can any of the company-specific risk be diversified away by investing in both China Development and Onyx Healthcare 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 China Development and Onyx Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Development Financial and Onyx Healthcare, you can compare the effects of market volatilities on China Development and Onyx Healthcare 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 China Development with a short position of Onyx Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Development and Onyx Healthcare.

Diversification Opportunities for China Development and Onyx Healthcare

0.13

Correlation Coefficient

China Development  Onyx Healthcare

Average diversification

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

Pair Corralation between China Development and Onyx Healthcare

Assuming the 90 days trading horizon China Development is expected to generate 1.28 times less return on investment than Onyx Healthcare. But when comparing it to its historical volatility, China Development Financial is 2.11 times less risky than Onyx Healthcare. It trades about 0.08 of its potential returns per unit of risk. Onyx Healthcare is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  14,800  in Onyx Healthcare on December 23, 2024 and sell it today you would earn a total of  700.00  from holding Onyx Healthcare or generate 4.73% return on investment over 90 days.

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

China Development Financial  vs.  Onyx Healthcare

China Development

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Development Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, China Development is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Onyx Healthcare

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Onyx Healthcare are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Onyx Healthcare may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with China Development and Onyx Healthcare

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

The idea behind China Development Financial and Onyx Healthcare 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.