Correlation Between Sinocat Environmental and HOB Biotech

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

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

Diversification Opportunities for Sinocat Environmental and HOB Biotech

0.74

Correlation Coefficient

Sinocat Environmental  HOB Biotech

Poor diversification

The 3 months correlation between Sinocat and HOB is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Sinocat Environmental Technolo and HOB Biotech Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOB Biotech Group and Sinocat Environmental 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 Sinocat Environmental Technology are associated (or correlated) with HOB Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HOB Biotech Group has no effect on the direction of Sinocat Environmental i.e., Sinocat Environmental and HOB Biotech go up and down completely randomly.

Pair Corralation between Sinocat Environmental and HOB Biotech

Assuming the 90 days trading horizon Sinocat Environmental Technology is expected to under-perform the HOB Biotech. But the stock apears to be less risky and, when comparing its historical volatility, Sinocat Environmental Technology is 1.37 times less risky than HOB Biotech. The stock trades about -0.02 of its potential returns per unit of risk. The HOB Biotech Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,375  in HOB Biotech Group on September 20, 2024 and sell it today you would earn a total of  7,039  from holding HOB Biotech Group or generate 208.56% return on investment over 90 days.

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

Sinocat Environmental Technolo  vs.  HOB Biotech Group

Sinocat Environmental

Risk-Adjusted Performance

18 of 100

Solid

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

HOB Biotech Group

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in HOB Biotech Group are ranked lower than 28 (%) 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.

Pair Trading with Sinocat Environmental and HOB Biotech

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

The idea behind Sinocat Environmental Technology and HOB Biotech Group 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.