Correlation Between Superior Plus and Guangzhou Baiyunshan

Can any of the company-specific risk be diversified away by investing in both Superior Plus and Guangzhou Baiyunshan 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 Superior Plus and Guangzhou Baiyunshan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Superior Plus Corp and Guangzhou Baiyunshan Pharmaceutical, you can compare the effects of market volatilities on Superior Plus and Guangzhou Baiyunshan 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 Superior Plus with a short position of Guangzhou Baiyunshan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Superior Plus and Guangzhou Baiyunshan.

Diversification Opportunities for Superior Plus and Guangzhou Baiyunshan

-0.56

Correlation Coefficient

Superior Plus  Guangzhou Baiyunshan

Excellent diversification

The 3 months correlation between Superior and Guangzhou is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and Guangzhou Baiyunshan Pharmaceu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Baiyunshan and Superior Plus 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 Superior Plus Corp are associated (or correlated) with Guangzhou Baiyunshan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Baiyunshan has no effect on the direction of Superior Plus i.e., Superior Plus and Guangzhou Baiyunshan go up and down completely randomly.

Pair Corralation between Superior Plus and Guangzhou Baiyunshan

Assuming the 90 days horizon Superior Plus Corp is expected to under-perform the Guangzhou Baiyunshan. But the stock apears to be less risky and, when comparing its historical volatility, Superior Plus Corp is 1.55 times less risky than Guangzhou Baiyunshan. The stock trades about -0.04 of its potential returns per unit of risk. The Guangzhou Baiyunshan Pharmaceutical is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  125.00  in Guangzhou Baiyunshan Pharmaceutical on October 5, 2024 and sell it today you would earn a total of  87.00  from holding Guangzhou Baiyunshan Pharmaceutical or generate 69.6% return on investment over 90 days.

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

Superior Plus Corp  vs.  Guangzhou Baiyunshan Pharmaceu

Superior Plus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Guangzhou Baiyunshan

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Guangzhou Baiyunshan Pharmaceutical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unsteady basic indicators, Guangzhou Baiyunshan may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Superior Plus and Guangzhou Baiyunshan

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

The idea behind Superior Plus Corp and Guangzhou Baiyunshan Pharmaceutical 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.