Correlation Between China De and Shanrong Biotechnology

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

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

Diversification Opportunities for China De and Shanrong Biotechnology

0.7

Correlation Coefficient

China De  Shanrong Biotechnology

Poor diversification

The 3 months correlation between China and Shanrong is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding China De Xiao and Shanrong Biotechnology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanrong Biotechnology and China De 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 De Xiao are associated (or correlated) with Shanrong Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanrong Biotechnology has no effect on the direction of China De i.e., China De and Shanrong Biotechnology go up and down completely randomly.

Pair Corralation between China De and Shanrong Biotechnology

Given the investment horizon of 90 days China De Xiao is expected to under-perform the Shanrong Biotechnology. But the pink sheet apears to be less risky and, when comparing its historical volatility, China De Xiao is 9.74 times less risky than Shanrong Biotechnology. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Shanrong Biotechnology Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  49.00  in Shanrong Biotechnology Corp on October 25, 2024 and sell it today you would earn a total of  51.00  from holding Shanrong Biotechnology Corp or generate 104.08% return on investment over 90 days.

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

China De Xiao  vs.  Shanrong Biotechnology Corp

China De Xiao

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China De Xiao has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Shanrong Biotechnology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shanrong Biotechnology Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent fundamental drivers, Shanrong Biotechnology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China De and Shanrong Biotechnology

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

The idea behind China De Xiao and Shanrong Biotechnology Corp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..