Correlation Between Golden Biotechnology and Hung Chou

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

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

Diversification Opportunities for Golden Biotechnology and Hung Chou

-0.73

Correlation Coefficient

Golden Biotechnology  Hung Chou

Pay attention - limited upside

The 3 months correlation between Golden and Hung is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Golden Biotechnology and Hung Chou Fiber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hung Chou Fiber and Golden 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 Golden Biotechnology are associated (or correlated) with Hung Chou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hung Chou Fiber has no effect on the direction of Golden Biotechnology i.e., Golden Biotechnology and Hung Chou go up and down completely randomly.

Pair Corralation between Golden Biotechnology and Hung Chou

Assuming the 90 days trading horizon Golden Biotechnology is expected to under-perform the Hung Chou. In addition to that, Golden Biotechnology is 2.26 times more volatile than Hung Chou Fiber. It trades about -0.03 of its total potential returns per unit of risk. Hung Chou Fiber is currently generating about 0.18 per unit of volatility. If you would invest  1,090  in Hung Chou Fiber on December 30, 2024 and sell it today you would earn a total of  140.00  from holding Hung Chou Fiber or generate 12.84% return on investment over 90 days.

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

Golden Biotechnology  vs.  Hung Chou Fiber

Golden Biotechnology

Risk-Adjusted Performance

Very Weak

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

Hung Chou Fiber

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hung Chou Fiber are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hung Chou showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Golden Biotechnology and Hung Chou

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

The idea behind Golden Biotechnology and Hung Chou Fiber 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.