Correlation Between China Television and PharmaEngine

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

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

Diversification Opportunities for China Television and PharmaEngine

0.12

Correlation Coefficient

China Television  PharmaEngine

Average diversification

The 3 months correlation between China and PharmaEngine is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding China Television Co and PharmaEngine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PharmaEngine and China Television 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 China Television Co 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 China Television i.e., China Television and PharmaEngine go up and down completely randomly.

Pair Corralation between China Television and PharmaEngine

Assuming the 90 days trading horizon China Television Co is expected to under-perform the PharmaEngine. But the stock apears to be less risky and, when comparing its historical volatility, China Television Co is 1.6 times less risky than PharmaEngine. The stock trades about -0.19 of its potential returns per unit of risk. The PharmaEngine is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  8,880  in PharmaEngine on October 7, 2024 and sell it today you would earn a total of  950.00  from holding PharmaEngine or generate 10.7% return on investment over 90 days.

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

China Television Co  vs.  PharmaEngine

China Television

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Television Co 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.

PharmaEngine

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PharmaEngine are ranked lower than 5 (%) 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 February 2025.

Pair Trading with China Television and PharmaEngine

The main advantage of trading using opposite China Television and PharmaEngine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Television 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 China Television Co 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.