Correlation Between Shenzhen Bioeasy and Anhui Huaheng

Can any of the company-specific risk be diversified away by investing in both Shenzhen Bioeasy and Anhui Huaheng 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 Shenzhen Bioeasy and Anhui Huaheng into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Shenzhen Bioeasy and Anhui Huaheng

0.24

Correlation Coefficient

Shenzhen Bioeasy  Anhui Huaheng

Modest diversification

The 3 months correlation between Shenzhen and Anhui is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Bioeasy Biotechnology and Anhui Huaheng Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Huaheng Biotec and Shenzhen Bioeasy 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 Shenzhen Bioeasy Biotechnology are associated (or correlated) with Anhui Huaheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Huaheng Biotec has no effect on the direction of Shenzhen Bioeasy i.e., Shenzhen Bioeasy and Anhui Huaheng go up and down completely randomly.

Pair Corralation between Shenzhen Bioeasy and Anhui Huaheng

Assuming the 90 days trading horizon Shenzhen Bioeasy Biotechnology is expected to under-perform the Anhui Huaheng. In addition to that, Shenzhen Bioeasy is 1.43 times more volatile than Anhui Huaheng Biotechnology. It trades about -0.29 of its total potential returns per unit of risk. Anhui Huaheng Biotechnology is currently generating about -0.4 per unit of volatility. If you would invest  3,577  in Anhui Huaheng Biotechnology on October 7, 2024 and sell it today you would lose (628.00) from holding Anhui Huaheng Biotechnology or give up 17.56% of portfolio value over 90 days.

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

Shenzhen Bioeasy Biotechnology  vs.  Anhui Huaheng Biotechnology

Shenzhen Bioeasy Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen Bioeasy Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Anhui Huaheng Biotec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anhui Huaheng Biotechnology 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shenzhen Bioeasy and Anhui Huaheng

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

The idea behind Shenzhen Bioeasy Biotechnology and Anhui Huaheng 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.