Correlation Between Xiangyu Medical and Shenzhen Bioeasy

Can any of the company-specific risk be diversified away by investing in both Xiangyu Medical and Shenzhen Bioeasy 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 Xiangyu Medical and Shenzhen Bioeasy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xiangyu Medical Co and Shenzhen Bioeasy Biotechnology, you can compare the effects of market volatilities on Xiangyu Medical and Shenzhen Bioeasy 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 Xiangyu Medical with a short position of Shenzhen Bioeasy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiangyu Medical and Shenzhen Bioeasy.

Diversification Opportunities for Xiangyu Medical and Shenzhen Bioeasy

0.62

Correlation Coefficient

Xiangyu Medical  Shenzhen Bioeasy

Poor diversification

The 3 months correlation between Xiangyu and Shenzhen is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Xiangyu Medical Co and Shenzhen Bioeasy Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Bioeasy Bio and Xiangyu Medical 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 Xiangyu Medical Co are associated (or correlated) with Shenzhen Bioeasy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Bioeasy Bio has no effect on the direction of Xiangyu Medical i.e., Xiangyu Medical and Shenzhen Bioeasy go up and down completely randomly.

Pair Corralation between Xiangyu Medical and Shenzhen Bioeasy

Assuming the 90 days trading horizon Xiangyu Medical Co is expected to generate 1.25 times more return on investment than Shenzhen Bioeasy. However, Xiangyu Medical is 1.25 times more volatile than Shenzhen Bioeasy Biotechnology. It trades about 0.09 of its potential returns per unit of risk. Shenzhen Bioeasy Biotechnology is currently generating about 0.02 per unit of risk. If you would invest  3,122  in Xiangyu Medical Co on December 27, 2024 and sell it today you would earn a total of  529.00  from holding Xiangyu Medical Co or generate 16.94% return on investment over 90 days.

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

Xiangyu Medical Co  vs.  Shenzhen Bioeasy Biotechnology

Xiangyu Medical

Risk-Adjusted Performance

OK

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

Shenzhen Bioeasy Bio

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Bioeasy Biotechnology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shenzhen Bioeasy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Xiangyu Medical and Shenzhen Bioeasy

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

The idea behind Xiangyu Medical Co and Shenzhen Bioeasy 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.