Correlation Between Genovate Biotechnology and Cheng Mei

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

By analyzing existing cross correlation between Genovate Biotechnology Co and Cheng Mei Materials, you can compare the effects of market volatilities on Genovate Biotechnology and Cheng Mei 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 Genovate Biotechnology with a short position of Cheng Mei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genovate Biotechnology and Cheng Mei.

Diversification Opportunities for Genovate Biotechnology and Cheng Mei

0.42

Correlation Coefficient

Genovate Biotechnology  Cheng Mei

Very weak diversification

The 3 months correlation between Genovate and Cheng is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Genovate Biotechnology Co and Cheng Mei Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Mei Materials and Genovate Biotechnology 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 Genovate Biotechnology Co are associated (or correlated) with Cheng Mei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Mei Materials has no effect on the direction of Genovate Biotechnology i.e., Genovate Biotechnology and Cheng Mei go up and down completely randomly.

Pair Corralation between Genovate Biotechnology and Cheng Mei

Assuming the 90 days trading horizon Genovate Biotechnology is expected to generate 2.07 times less return on investment than Cheng Mei. In addition to that, Genovate Biotechnology is 2.43 times more volatile than Cheng Mei Materials. It trades about 0.01 of its total potential returns per unit of risk. Cheng Mei Materials is currently generating about 0.04 per unit of volatility. If you would invest  986.00  in Cheng Mei Materials on September 20, 2024 and sell it today you would earn a total of  324.00  from holding Cheng Mei Materials or generate 32.86% return on investment over 90 days.

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

Genovate Biotechnology Co  vs.  Cheng Mei Materials

Genovate Biotechnology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genovate Biotechnology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Genovate Biotechnology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Cheng Mei Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cheng Mei Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Cheng Mei is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Genovate Biotechnology and Cheng Mei

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

The idea behind Genovate Biotechnology Co and Cheng Mei Materials 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.