Correlation Between Pharnext and Guandao Puer

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

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

Diversification Opportunities for Pharnext and Guandao Puer

-1.0

Correlation Coefficient

Pharnext  Guandao Puer

Pay attention - limited upside

The 3 months correlation between Pharnext and Guandao is -1.0. Overlapping area represents the amount of risk that can be diversified away by holding Pharnext SA and Guandao Puer Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guandao Puer Investment and Pharnext 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 Pharnext SA are associated (or correlated) with Guandao Puer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guandao Puer Investment has no effect on the direction of Pharnext i.e., Pharnext and Guandao Puer go up and down completely randomly.

Pair Corralation between Pharnext and Guandao Puer

If you would invest  45.00  in Guandao Puer Investment on October 8, 2024 and sell it today you would earn a total of  0.00  from holding Guandao Puer Investment or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Strong
Accuracy	83.33%
Values	Daily Returns

Pharnext SA  vs.  Guandao Puer Investment

Pharnext SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pharnext SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Pharnext is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Guandao Puer Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guandao Puer Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Guandao Puer is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Pharnext and Guandao Puer

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

The idea behind Pharnext SA and Guandao Puer Investment 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.