Correlation Between HYBRIGENICS and Shanghai Pharmaceuticals

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

By analyzing existing cross correlation between HYBRIGENICS A and Shanghai Pharmaceuticals Holding, you can compare the effects of market volatilities on HYBRIGENICS and Shanghai Pharmaceuticals 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 HYBRIGENICS with a short position of Shanghai Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of HYBRIGENICS and Shanghai Pharmaceuticals.

Diversification Opportunities for HYBRIGENICS and Shanghai Pharmaceuticals

-0.36

Correlation Coefficient

HYBRIGENICS  Shanghai Pharmaceuticals

Very good diversification

The 3 months correlation between HYBRIGENICS and Shanghai is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding HYBRIGENICS A and Shanghai Pharmaceuticals Holdi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Pharmaceuticals and HYBRIGENICS 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 HYBRIGENICS A are associated (or correlated) with Shanghai Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Pharmaceuticals has no effect on the direction of HYBRIGENICS i.e., HYBRIGENICS and Shanghai Pharmaceuticals go up and down completely randomly.

Pair Corralation between HYBRIGENICS and Shanghai Pharmaceuticals

Assuming the 90 days trading horizon HYBRIGENICS A is expected to generate 1.66 times more return on investment than Shanghai Pharmaceuticals. However, HYBRIGENICS is 1.66 times more volatile than Shanghai Pharmaceuticals Holding. It trades about 0.11 of its potential returns per unit of risk. Shanghai Pharmaceuticals Holding is currently generating about 0.12 per unit of risk. If you would invest  0.31  in HYBRIGENICS A on September 23, 2024 and sell it today you would earn a total of  0.35  from holding HYBRIGENICS A or generate 112.9% return on investment over 90 days.

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

HYBRIGENICS A   vs.  Shanghai Pharmaceuticals Holdi

HYBRIGENICS A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HYBRIGENICS A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Shanghai Pharmaceuticals

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Pharmaceuticals Holding are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Shanghai Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HYBRIGENICS and Shanghai Pharmaceuticals

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

The idea behind HYBRIGENICS A and Shanghai Pharmaceuticals Holding 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.