Correlation Between Food Life and CanSino Biologics

Can any of the company-specific risk be diversified away by investing in both Food Life and CanSino Biologics 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 Food Life and CanSino Biologics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Food Life Companies and CanSino Biologics, you can compare the effects of market volatilities on Food Life and CanSino Biologics 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 Food Life with a short position of CanSino Biologics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Food Life and CanSino Biologics.

Diversification Opportunities for Food Life and CanSino Biologics

0.54

Correlation Coefficient

Food Life  CanSino Biologics

Very weak diversification

The 3 months correlation between Food and CanSino is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Food Life Companies and CanSino Biologics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CanSino Biologics and Food Life 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 Food Life Companies are associated (or correlated) with CanSino Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CanSino Biologics has no effect on the direction of Food Life i.e., Food Life and CanSino Biologics go up and down completely randomly.

Pair Corralation between Food Life and CanSino Biologics

Assuming the 90 days horizon Food Life Companies is expected to generate 0.39 times more return on investment than CanSino Biologics. However, Food Life Companies is 2.56 times less risky than CanSino Biologics. It trades about 0.11 of its potential returns per unit of risk. CanSino Biologics is currently generating about 0.03 per unit of risk. If you would invest  1,790  in Food Life Companies on October 5, 2024 and sell it today you would earn a total of  210.00  from holding Food Life Companies or generate 11.73% return on investment over 90 days.

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

Food Life Companies  vs.  CanSino Biologics

Food Life Companies

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Food Life Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Food Life reported solid returns over the last few months and may actually be approaching a breakup point.

CanSino Biologics

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days CanSino Biologics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile basic indicators, CanSino Biologics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Food Life and CanSino Biologics

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

The idea behind Food Life Companies and CanSino Biologics 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.