Correlation Between Changchun BCHT and Shanghai OPM

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

Diversification Opportunities for Changchun BCHT and Shanghai OPM

0.22

Correlation Coefficient

Changchun BCHT  Shanghai OPM

Modest diversification

The 3 months correlation between Changchun and Shanghai is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Changchun BCHT Biotechnology and Shanghai OPM Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai OPM Biosciences 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 OPM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai OPM Biosciences has no effect on the direction of Changchun BCHT i.e., Changchun BCHT and Shanghai OPM go up and down completely randomly.

Pair Corralation between Changchun BCHT and Shanghai OPM

Assuming the 90 days trading horizon Changchun BCHT Biotechnology is expected to under-perform the Shanghai OPM. But the stock apears to be less risky and, when comparing its historical volatility, Changchun BCHT Biotechnology is 1.99 times less risky than Shanghai OPM. The stock trades about -0.14 of its potential returns per unit of risk. The Shanghai OPM Biosciences is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,169  in Shanghai OPM Biosciences on October 23, 2024 and sell it today you would earn a total of  747.00  from holding Shanghai OPM Biosciences or generate 23.57% return on investment over 90 days.

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

Changchun BCHT Biotechnology  vs.  Shanghai OPM Biosciences

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 OPM Biosciences

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai OPM Biosciences are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai OPM sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Changchun BCHT and Shanghai OPM

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

The idea behind Changchun BCHT Biotechnology and Shanghai OPM Biosciences 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.