Correlation Between HOB Biotech and Shaanxi Energy

Can any of the company-specific risk be diversified away by investing in both HOB Biotech and Shaanxi Energy 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 HOB Biotech and Shaanxi Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HOB Biotech Group and Shaanxi Energy Investment, you can compare the effects of market volatilities on HOB Biotech and Shaanxi Energy 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 HOB Biotech with a short position of Shaanxi Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of HOB Biotech and Shaanxi Energy.

Diversification Opportunities for HOB Biotech and Shaanxi Energy

0.79

Correlation Coefficient

HOB Biotech  Shaanxi Energy

Poor diversification

The 3 months correlation between HOB and Shaanxi is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding HOB Biotech Group and Shaanxi Energy Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaanxi Energy Investment and HOB Biotech 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 HOB Biotech Group are associated (or correlated) with Shaanxi Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaanxi Energy Investment has no effect on the direction of HOB Biotech i.e., HOB Biotech and Shaanxi Energy go up and down completely randomly.

Pair Corralation between HOB Biotech and Shaanxi Energy

Assuming the 90 days trading horizon HOB Biotech Group is expected to under-perform the Shaanxi Energy. In addition to that, HOB Biotech is 4.56 times more volatile than Shaanxi Energy Investment. It trades about -0.11 of its total potential returns per unit of risk. Shaanxi Energy Investment is currently generating about -0.18 per unit of volatility. If you would invest  962.00  in Shaanxi Energy Investment on December 4, 2024 and sell it today you would lose (85.00) from holding Shaanxi Energy Investment or give up 8.84% of portfolio value over 90 days.

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

HOB Biotech Group  vs.  Shaanxi Energy Investment

HOB Biotech Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days HOB Biotech Group 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Shaanxi Energy Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shaanxi Energy Investment 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 HOB Biotech and Shaanxi Energy

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

The idea behind HOB Biotech Group and Shaanxi Energy Investment 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.