Correlation Between Armada Hflr and Guangzhou Baiyunshan

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

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

Diversification Opportunities for Armada Hflr and Guangzhou Baiyunshan

-0.49

Correlation Coefficient

Armada Hflr  Guangzhou Baiyunshan

Very good diversification

The 3 months correlation between Armada and Guangzhou is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hflr Pr and Guangzhou Baiyunshan Pharmaceu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Baiyunshan and Armada Hflr 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 Armada Hflr Pr 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 Armada Hflr i.e., Armada Hflr and Guangzhou Baiyunshan go up and down completely randomly.

Pair Corralation between Armada Hflr and Guangzhou Baiyunshan

Considering the 90-day investment horizon Armada Hflr is expected to generate 14.25 times less return on investment than Guangzhou Baiyunshan. But when comparing it to its historical volatility, Armada Hflr Pr is 1.97 times less risky than Guangzhou Baiyunshan. It trades about 0.01 of its potential returns per unit of risk. Guangzhou Baiyunshan Pharmaceutical is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  102.00  in Guangzhou Baiyunshan Pharmaceutical on September 24, 2024 and sell it today you would earn a total of  112.00  from holding Guangzhou Baiyunshan Pharmaceutical or generate 109.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.22%
Values	Daily Returns

Armada Hflr Pr  vs.  Guangzhou Baiyunshan Pharmaceu

Armada Hflr Pr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armada Hflr Pr has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Guangzhou Baiyunshan

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Baiyunshan Pharmaceutical are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Guangzhou Baiyunshan reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Armada Hflr and Guangzhou Baiyunshan

The main advantage of trading using opposite Armada Hflr and Guangzhou Baiyunshan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Armada Hflr 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 Armada Hflr Pr 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.