Correlation Between MEDIPAL HOLDINGS and Shanghai Pharmaceuticals

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

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

Diversification Opportunities for MEDIPAL HOLDINGS and Shanghai Pharmaceuticals

-0.11

Correlation Coefficient

MEDIPAL HOLDINGS  Shanghai Pharmaceuticals

Good diversification

The 3 months correlation between MEDIPAL and Shanghai is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding MEDIPAL HOLDINGS P and Shanghai Pharmaceuticals Holdi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Pharmaceuticals and MEDIPAL HOLDINGS 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 MEDIPAL HOLDINGS P 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 MEDIPAL HOLDINGS i.e., MEDIPAL HOLDINGS and Shanghai Pharmaceuticals go up and down completely randomly.

Pair Corralation between MEDIPAL HOLDINGS and Shanghai Pharmaceuticals

Assuming the 90 days horizon MEDIPAL HOLDINGS P is expected to under-perform the Shanghai Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, MEDIPAL HOLDINGS P is 1.46 times less risky than Shanghai Pharmaceuticals. The stock trades about -0.1 of its potential returns per unit of risk. The Shanghai Pharmaceuticals Holding is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  146.00  in Shanghai Pharmaceuticals Holding on October 10, 2024 and sell it today you would earn a total of  7.00  from holding Shanghai Pharmaceuticals Holding or generate 4.79% return on investment over 90 days.

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

MEDIPAL HOLDINGS P  vs.  Shanghai Pharmaceuticals Holdi

MEDIPAL HOLDINGS P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MEDIPAL HOLDINGS P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Shanghai Pharmaceuticals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Pharmaceuticals Holding are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Shanghai Pharmaceuticals is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MEDIPAL HOLDINGS and Shanghai Pharmaceuticals

The main advantage of trading using opposite MEDIPAL HOLDINGS and Shanghai Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MEDIPAL HOLDINGS 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 MEDIPAL HOLDINGS P 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.