Correlation Between HOB Biotech and Jiangxi Sunshine

Can any of the company-specific risk be diversified away by investing in both HOB Biotech and Jiangxi Sunshine 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 Jiangxi Sunshine 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 Jiangxi Sunshine Dairy, you can compare the effects of market volatilities on HOB Biotech and Jiangxi Sunshine 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 Jiangxi Sunshine. Check out your portfolio center. Please also check ongoing floating volatility patterns of HOB Biotech and Jiangxi Sunshine.

Diversification Opportunities for HOB Biotech and Jiangxi Sunshine

0.5

Correlation Coefficient

HOB Biotech  Jiangxi Sunshine

Very weak diversification

The 3 months correlation between HOB and Jiangxi is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding HOB Biotech Group and Jiangxi Sunshine Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangxi Sunshine Dairy 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 Jiangxi Sunshine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangxi Sunshine Dairy has no effect on the direction of HOB Biotech i.e., HOB Biotech and Jiangxi Sunshine go up and down completely randomly.

Pair Corralation between HOB Biotech and Jiangxi Sunshine

Assuming the 90 days trading horizon HOB Biotech Group is expected to under-perform the Jiangxi Sunshine. But the stock apears to be less risky and, when comparing its historical volatility, HOB Biotech Group is 1.11 times less risky than Jiangxi Sunshine. The stock trades about -0.26 of its potential returns per unit of risk. The Jiangxi Sunshine Dairy is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  1,223  in Jiangxi Sunshine Dairy on October 8, 2024 and sell it today you would lose (139.00) from holding Jiangxi Sunshine Dairy or give up 11.37% of portfolio value over 90 days.

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

HOB Biotech Group  vs.  Jiangxi Sunshine Dairy

HOB Biotech Group

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HOB Biotech Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HOB Biotech sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiangxi Sunshine Dairy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiangxi Sunshine Dairy 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 Jiangxi Sunshine

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

The idea behind HOB Biotech Group and Jiangxi Sunshine Dairy 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.