Correlation Between Hsin Ba and PharmaEngine

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

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

Diversification Opportunities for Hsin Ba and PharmaEngine

-0.83

Correlation Coefficient

Hsin Ba  PharmaEngine

Pay attention - limited upside

The 3 months correlation between Hsin and PharmaEngine is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Hsin Ba Ba and PharmaEngine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PharmaEngine and Hsin Ba 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 Hsin Ba Ba are associated (or correlated) with PharmaEngine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PharmaEngine has no effect on the direction of Hsin Ba i.e., Hsin Ba and PharmaEngine go up and down completely randomly.

Pair Corralation between Hsin Ba and PharmaEngine

Assuming the 90 days trading horizon Hsin Ba Ba is expected to under-perform the PharmaEngine. In addition to that, Hsin Ba is 1.28 times more volatile than PharmaEngine. It trades about -0.19 of its total potential returns per unit of risk. PharmaEngine is currently generating about 0.08 per unit of volatility. If you would invest  8,220  in PharmaEngine on September 13, 2024 and sell it today you would earn a total of  840.00  from holding PharmaEngine or generate 10.22% return on investment over 90 days.

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

Hsin Ba Ba  vs.  PharmaEngine

Hsin Ba Ba

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hsin Ba Ba 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

PharmaEngine

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PharmaEngine are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, PharmaEngine may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hsin Ba and PharmaEngine

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

The idea behind Hsin Ba Ba and PharmaEngine 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.