Correlation Between China Pharma and Bright Green

Can any of the company-specific risk be diversified away by investing in both China Pharma and Bright Green 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 Bright Green 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 Bright Green Corp, you can compare the effects of market volatilities on China Pharma and Bright Green 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 Bright Green. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Pharma and Bright Green.

Diversification Opportunities for China Pharma and Bright Green

0.52

Correlation Coefficient

China Pharma  Bright Green

Very weak diversification

The 3 months correlation between China and Bright is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding China Pharma Holdings and Bright Green Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Green Corp 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 Bright Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Green Corp has no effect on the direction of China Pharma i.e., China Pharma and Bright Green go up and down completely randomly.

Pair Corralation between China Pharma and Bright Green

Given the investment horizon of 90 days China Pharma Holdings is expected to generate 0.51 times more return on investment than Bright Green. However, China Pharma Holdings is 1.98 times less risky than Bright Green. It trades about 0.01 of its potential returns per unit of risk. Bright Green Corp is currently generating about -0.15 per unit of risk. If you would invest  25.00  in China Pharma Holdings on September 29, 2024 and sell it today you would lose (4.00) from holding China Pharma Holdings or give up 16.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	50.0%
Values	Daily Returns

China Pharma Holdings  vs.  Bright Green Corp

China Pharma Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Pharma Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, China Pharma is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Bright Green Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bright Green Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Bright Green is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Pharma and Bright Green

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

The idea behind China Pharma Holdings and Bright Green 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.