Correlation Between Changchun BCHT and Shanghai Rightongene

Can any of the company-specific risk be diversified away by investing in both Changchun BCHT and Shanghai Rightongene 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 Shanghai Rightongene 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 Shanghai Rightongene Biotechnology, you can compare the effects of market volatilities on Changchun BCHT and Shanghai Rightongene 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 Shanghai Rightongene. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changchun BCHT and Shanghai Rightongene.

Diversification Opportunities for Changchun BCHT and Shanghai Rightongene

0.08

Correlation Coefficient

Changchun BCHT  Shanghai Rightongene

Significant diversification

The 3 months correlation between Changchun and Shanghai is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Changchun BCHT Biotechnology and Shanghai Rightongene Biotechno in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Rightongene 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 Shanghai Rightongene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Rightongene has no effect on the direction of Changchun BCHT i.e., Changchun BCHT and Shanghai Rightongene go up and down completely randomly.

Pair Corralation between Changchun BCHT and Shanghai Rightongene

Assuming the 90 days trading horizon Changchun BCHT Biotechnology is expected to generate 0.37 times more return on investment than Shanghai Rightongene. However, Changchun BCHT Biotechnology is 2.73 times less risky than Shanghai Rightongene. It trades about -0.44 of its potential returns per unit of risk. Shanghai Rightongene Biotechnology is currently generating about -0.17 per unit of risk. If you would invest  2,751  in Changchun BCHT Biotechnology on October 7, 2024 and sell it today you would lose (385.00) from holding Changchun BCHT Biotechnology or give up 13.99% of portfolio value over 90 days.

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

Changchun BCHT Biotechnology  vs.  Shanghai Rightongene Biotechno

Changchun BCHT Biote

Risk-Adjusted Performance

0 of 100

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.

Shanghai Rightongene

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai Rightongene Biotechnology 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 Changchun BCHT and Shanghai Rightongene

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

The idea behind Changchun BCHT Biotechnology and Shanghai Rightongene Biotechnology 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..