Correlation Between China Pharma and OrganiGram Holdings

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

Diversification Opportunities for China Pharma and OrganiGram Holdings

0.87

Correlation Coefficient

China Pharma  OrganiGram Holdings

Very poor diversification

The 3 months correlation between China and OrganiGram is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding China Pharma Holdings and OrganiGram Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OrganiGram Holdings 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 OrganiGram Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OrganiGram Holdings has no effect on the direction of China Pharma i.e., China Pharma and OrganiGram Holdings go up and down completely randomly.

Pair Corralation between China Pharma and OrganiGram Holdings

Given the investment horizon of 90 days China Pharma Holdings is expected to under-perform the OrganiGram Holdings. In addition to that, China Pharma is 1.66 times more volatile than OrganiGram Holdings. It trades about -0.03 of its total potential returns per unit of risk. OrganiGram Holdings is currently generating about 0.09 per unit of volatility. If you would invest  152.00  in OrganiGram Holdings on October 1, 2024 and sell it today you would earn a total of  9.00  from holding OrganiGram Holdings or generate 5.92% return on investment over 90 days.

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

China Pharma Holdings  vs.  OrganiGram Holdings

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.

OrganiGram Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with China Pharma and OrganiGram Holdings

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

The idea behind China Pharma Holdings and OrganiGram Holdings 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.