Correlation Between Guangdong Marubi and Chison Medical

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

By analyzing existing cross correlation between Guangdong Marubi Biotechnology and Chison Medical Technologies, you can compare the effects of market volatilities on Guangdong Marubi and Chison Medical 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 Guangdong Marubi with a short position of Chison Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Marubi and Chison Medical.

Diversification Opportunities for Guangdong Marubi and Chison Medical

0.24

Correlation Coefficient

Guangdong Marubi  Chison Medical

Modest diversification

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

Pair Corralation between Guangdong Marubi and Chison Medical

Assuming the 90 days trading horizon Guangdong Marubi Biotechnology is expected to generate 0.95 times more return on investment than Chison Medical. However, Guangdong Marubi Biotechnology is 1.05 times less risky than Chison Medical. It trades about 0.04 of its potential returns per unit of risk. Chison Medical Technologies is currently generating about -0.08 per unit of risk. If you would invest  2,976  in Guangdong Marubi Biotechnology on October 8, 2024 and sell it today you would earn a total of  156.00  from holding Guangdong Marubi Biotechnology or generate 5.24% return on investment over 90 days.

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

Guangdong Marubi Biotechnology  vs.  Chison Medical Technologies

Guangdong Marubi Bio

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Marubi Biotechnology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Marubi may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Chison Medical Techn

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chison Medical Technologies 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 Guangdong Marubi and Chison Medical

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

The idea behind Guangdong Marubi Biotechnology and Chison Medical Technologies 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.