Correlation Between Shanghai OPM and Lepu Medical

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Can any of the company-specific risk be diversified away by investing in both Shanghai OPM and Lepu 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 Shanghai OPM and Lepu Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shanghai OPM Biosciences and Lepu Medical Tech, you can compare the effects of market volatilities on Shanghai OPM and Lepu 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 Shanghai OPM with a short position of Lepu Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai OPM and Lepu Medical.

Diversification Opportunities for Shanghai OPM and Lepu Medical

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Shanghai and Lepu is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai OPM Biosciences and Lepu Medical Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lepu Medical Tech and Shanghai OPM 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 OPM Biosciences are associated (or correlated) with Lepu Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lepu Medical Tech has no effect on the direction of Shanghai OPM i.e., Shanghai OPM and Lepu Medical go up and down completely randomly.

Pair Corralation between Shanghai OPM and Lepu Medical

Assuming the 90 days trading horizon Shanghai OPM Biosciences is expected to under-perform the Lepu Medical. In addition to that, Shanghai OPM is 1.62 times more volatile than Lepu Medical Tech. It trades about -0.11 of its total potential returns per unit of risk. Lepu Medical Tech is currently generating about -0.04 per unit of volatility. If you would invest  1,238  in Lepu Medical Tech on September 20, 2024 and sell it today you would lose (20.00) from holding Lepu Medical Tech or give up 1.62% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Shanghai OPM Biosciences  vs.  Lepu Medical Tech

 Performance 
       Timeline  
Shanghai OPM Biosciences 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai OPM Biosciences are ranked lower than 13 (%) 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.
Lepu Medical Tech 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Lepu Medical Tech are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lepu Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Shanghai OPM and Lepu Medical Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shanghai OPM and Lepu Medical

The main advantage of trading using opposite Shanghai OPM and Lepu Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shanghai OPM position performs unexpectedly, Lepu 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 Lepu Medical will offset losses from the drop in Lepu Medical's long position.
The idea behind Shanghai OPM Biosciences and Lepu Medical Tech 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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