Correlation Between Chuangs China and WUXI BIOLOGICS

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

By analyzing existing cross correlation between Chuangs China Investments and WUXI BIOLOGICS UNSPADR2, you can compare the effects of market volatilities on Chuangs China and WUXI BIOLOGICS 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 Chuangs China with a short position of WUXI BIOLOGICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chuangs China and WUXI BIOLOGICS.

Diversification Opportunities for Chuangs China and WUXI BIOLOGICS

0.0

Correlation Coefficient

Chuangs China  WUXI BIOLOGICS

Pay attention - limited upside

The 3 months correlation between Chuangs and WUXI is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Chuangs China Investments and WUXI BIOLOGICS UNSPADR2 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WUXI BIOLOGICS UNSPADR2 and Chuangs China 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 Chuangs China Investments are associated (or correlated) with WUXI BIOLOGICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WUXI BIOLOGICS UNSPADR2 has no effect on the direction of Chuangs China i.e., Chuangs China and WUXI BIOLOGICS go up and down completely randomly.

Pair Corralation between Chuangs China and WUXI BIOLOGICS

Assuming the 90 days horizon Chuangs China Investments is expected to generate 1.11 times more return on investment than WUXI BIOLOGICS. However, Chuangs China is 1.11 times more volatile than WUXI BIOLOGICS UNSPADR2. It trades about 0.0 of its potential returns per unit of risk. WUXI BIOLOGICS UNSPADR2 is currently generating about -0.03 per unit of risk. If you would invest  1.50  in Chuangs China Investments on October 21, 2024 and sell it today you would lose (0.50) from holding Chuangs China Investments or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Chuangs China Investments  vs.  WUXI BIOLOGICS UNSPADR2

Chuangs China Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chuangs China Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Chuangs China is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

WUXI BIOLOGICS UNSPADR2

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WUXI BIOLOGICS UNSPADR2 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WUXI BIOLOGICS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chuangs China and WUXI BIOLOGICS

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

The idea behind Chuangs China Investments and WUXI BIOLOGICS UNSPADR2 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.