Correlation Between Changchun BCHT and Cofco Biochemical

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Changchun BCHT and Cofco Biochemical 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 Changchun BCHT and Cofco Biochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Changchun BCHT Biotechnology and Cofco Biochemical Anhui, you can compare the effects of market volatilities on Changchun BCHT and Cofco Biochemical 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 Changchun BCHT with a short position of Cofco Biochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changchun BCHT and Cofco Biochemical.

Diversification Opportunities for Changchun BCHT and Cofco Biochemical

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Changchun and Cofco is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Changchun BCHT Biotechnology and Cofco Biochemical Anhui in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cofco Biochemical Anhui and Changchun BCHT 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 Changchun BCHT Biotechnology are associated (or correlated) with Cofco Biochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cofco Biochemical Anhui has no effect on the direction of Changchun BCHT i.e., Changchun BCHT and Cofco Biochemical go up and down completely randomly.

Pair Corralation between Changchun BCHT and Cofco Biochemical

Assuming the 90 days trading horizon Changchun BCHT Biotechnology is expected to generate 1.41 times more return on investment than Cofco Biochemical. However, Changchun BCHT is 1.41 times more volatile than Cofco Biochemical Anhui. It trades about -0.3 of its potential returns per unit of risk. Cofco Biochemical Anhui is currently generating about -0.43 per unit of risk. If you would invest  2,745  in Changchun BCHT Biotechnology on October 10, 2024 and sell it today you would lose (325.00) from holding Changchun BCHT Biotechnology or give up 11.84% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.45%
ValuesDaily Returns

Changchun BCHT Biotechnology  vs.  Cofco Biochemical Anhui

 Performance 
       Timeline  
Changchun BCHT Biote 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Changchun BCHT Biotechnology 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.
Cofco Biochemical Anhui 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Cofco Biochemical Anhui 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.

Changchun BCHT and Cofco Biochemical Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Changchun BCHT and Cofco Biochemical

The main advantage of trading using opposite Changchun BCHT and Cofco Biochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Changchun BCHT position performs unexpectedly, Cofco Biochemical 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 Cofco Biochemical will offset losses from the drop in Cofco Biochemical's long position.
The idea behind Changchun BCHT Biotechnology and Cofco Biochemical Anhui 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.
Check out your portfolio center.
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 Stocks Directory module to find actively traded stocks across global markets.

Other Complementary Tools

Competition Analyzer
Analyze and compare many basic indicators for a group of related or unrelated entities
Portfolio Optimization
Compute new portfolio that will generate highest expected return given your specified tolerance for risk
Watchlist Optimization
Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm
Cryptocurrency Center
Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency
Equity Valuation
Check real value of public entities based on technical and fundamental data