Correlation Between Penyao Environmental and HOB Biotech

Can any of the company-specific risk be diversified away by investing in both Penyao Environmental and HOB Biotech 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 Penyao Environmental and HOB Biotech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Penyao Environmental Protection and HOB Biotech Group, you can compare the effects of market volatilities on Penyao Environmental and HOB Biotech 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 Penyao Environmental with a short position of HOB Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penyao Environmental and HOB Biotech.

Diversification Opportunities for Penyao Environmental and HOB Biotech

0.72

Correlation Coefficient

Penyao Environmental  HOB Biotech

Poor diversification

The 3 months correlation between Penyao and HOB is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Penyao Environmental Protectio and HOB Biotech Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOB Biotech Group and Penyao Environmental 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 Penyao Environmental Protection are associated (or correlated) with HOB Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HOB Biotech Group has no effect on the direction of Penyao Environmental i.e., Penyao Environmental and HOB Biotech go up and down completely randomly.

Pair Corralation between Penyao Environmental and HOB Biotech

Assuming the 90 days trading horizon Penyao Environmental is expected to generate 6.77 times less return on investment than HOB Biotech. But when comparing it to its historical volatility, Penyao Environmental Protection is 1.81 times less risky than HOB Biotech. It trades about 0.02 of its potential returns per unit of risk. HOB Biotech Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,626  in HOB Biotech Group on October 10, 2024 and sell it today you would earn a total of  5,106  from holding HOB Biotech Group or generate 140.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Penyao Environmental Protectio  vs.  HOB Biotech Group

Penyao Environmental

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penyao Environmental Protection are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Penyao Environmental may actually be approaching a critical reversion point that can send shares even higher in February 2025.

HOB Biotech Group

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HOB Biotech Group are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HOB Biotech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penyao Environmental and HOB Biotech

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

The idea behind Penyao Environmental Protection and HOB Biotech Group 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.