Correlation Between Shanghai Junshi and North Chemical

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

By analyzing existing cross correlation between Shanghai Junshi Biosciences and North Chemical Industries, you can compare the effects of market volatilities on Shanghai Junshi and North Chemical 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 Shanghai Junshi with a short position of North Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Junshi and North Chemical.

Diversification Opportunities for Shanghai Junshi and North Chemical

0.77

Correlation Coefficient

Shanghai Junshi  North Chemical

Poor diversification

The 3 months correlation between Shanghai and North is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Junshi Biosciences and North Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Chemical Industries and Shanghai Junshi 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 Shanghai Junshi Biosciences are associated (or correlated) with North Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Chemical Industries has no effect on the direction of Shanghai Junshi i.e., Shanghai Junshi and North Chemical go up and down completely randomly.

Pair Corralation between Shanghai Junshi and North Chemical

Assuming the 90 days trading horizon Shanghai Junshi Biosciences is expected to under-perform the North Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Shanghai Junshi Biosciences is 1.16 times less risky than North Chemical. The stock trades about -0.05 of its potential returns per unit of risk. The North Chemical Industries is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,085  in North Chemical Industries on October 23, 2024 and sell it today you would lose (133.00) from holding North Chemical Industries or give up 12.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Shanghai Junshi Biosciences  vs.  North Chemical Industries

Shanghai Junshi Bios

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai Junshi Biosciences 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.

North Chemical Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days North Chemical Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Shanghai Junshi and North Chemical

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

The idea behind Shanghai Junshi Biosciences and North Chemical Industries 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.