Correlation Between Great China and Easywell Biomedicals

Can any of the company-specific risk be diversified away by investing in both Great China and Easywell Biomedicals 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 Great China and Easywell Biomedicals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Great China Metal and Easywell Biomedicals, you can compare the effects of market volatilities on Great China and Easywell Biomedicals 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 Great China with a short position of Easywell Biomedicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great China and Easywell Biomedicals.

Diversification Opportunities for Great China and Easywell Biomedicals

0.08

Correlation Coefficient

Great China  Easywell Biomedicals

Significant diversification

The 3 months correlation between Great and Easywell is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Great China Metal and Easywell Biomedicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Easywell Biomedicals and Great China 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 Great China Metal are associated (or correlated) with Easywell Biomedicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Easywell Biomedicals has no effect on the direction of Great China i.e., Great China and Easywell Biomedicals go up and down completely randomly.

Pair Corralation between Great China and Easywell Biomedicals

Assuming the 90 days trading horizon Great China Metal is expected to under-perform the Easywell Biomedicals. But the stock apears to be less risky and, when comparing its historical volatility, Great China Metal is 8.95 times less risky than Easywell Biomedicals. The stock trades about 0.0 of its potential returns per unit of risk. The Easywell Biomedicals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,573  in Easywell Biomedicals on October 11, 2024 and sell it today you would earn a total of  4,627  from holding Easywell Biomedicals or generate 294.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Great China Metal  vs.  Easywell Biomedicals

Great China Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great China Metal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Great China is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Easywell Biomedicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Easywell Biomedicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Great China and Easywell Biomedicals

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

The idea behind Great China Metal and Easywell Biomedicals 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.