Correlation Between CLST Holdings and Shanrong Biotechnology

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

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

Diversification Opportunities for CLST Holdings and Shanrong Biotechnology

0.49

Correlation Coefficient

CLST Holdings  Shanrong Biotechnology

Very weak diversification

The 3 months correlation between CLST and Shanrong is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding CLST Holdings and Shanrong Biotechnology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanrong Biotechnology and CLST Holdings 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 CLST Holdings 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 CLST Holdings i.e., CLST Holdings and Shanrong Biotechnology go up and down completely randomly.

Pair Corralation between CLST Holdings and Shanrong Biotechnology

Given the investment horizon of 90 days CLST Holdings is expected to generate 1.35 times less return on investment than Shanrong Biotechnology. But when comparing it to its historical volatility, CLST Holdings is 1.64 times less risky than Shanrong Biotechnology. It trades about 0.18 of its potential returns per unit of risk. Shanrong Biotechnology Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Shanrong Biotechnology Corp on December 20, 2024 and sell it today you would earn a total of  29.00  from holding Shanrong Biotechnology Corp or generate 263.64% return on investment over 90 days.

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

CLST Holdings  vs.  Shanrong Biotechnology Corp

CLST Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CLST Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, CLST Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Shanrong Biotechnology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shanrong Biotechnology Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, Shanrong Biotechnology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CLST Holdings and Shanrong Biotechnology

The main advantage of trading using opposite CLST Holdings and Shanrong Biotechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CLST Holdings 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 CLST Holdings 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.