Correlation Between China Pharma and Alimera Sciences

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

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

Diversification Opportunities for China Pharma and Alimera Sciences

-0.29

Correlation Coefficient

China Pharma  Alimera Sciences

Very good diversification

The 3 months correlation between China and Alimera is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding China Pharma Holdings and Alimera Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alimera Sciences and China Pharma 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 Pharma Holdings are associated (or correlated) with Alimera Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alimera Sciences has no effect on the direction of China Pharma i.e., China Pharma and Alimera Sciences go up and down completely randomly.

Pair Corralation between China Pharma and Alimera Sciences

If you would invest  554.00  in Alimera Sciences on October 1, 2024 and sell it today you would earn a total of  0.00  from holding Alimera Sciences or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

China Pharma Holdings  vs.  Alimera Sciences

China Pharma Holdings

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days China Pharma Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Alimera Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alimera Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Alimera Sciences is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with China Pharma and Alimera Sciences

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

The idea behind China Pharma Holdings and Alimera Sciences 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.