Correlation Between Defence Therapeutics and Sino Biopharmaceutica

Can any of the company-specific risk be diversified away by investing in both Defence Therapeutics and Sino Biopharmaceutica 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 Defence Therapeutics and Sino Biopharmaceutica into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Defence Therapeutics and Sino Biopharmaceutical Ltd, you can compare the effects of market volatilities on Defence Therapeutics and Sino Biopharmaceutica 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 Defence Therapeutics with a short position of Sino Biopharmaceutica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Defence Therapeutics and Sino Biopharmaceutica.

Diversification Opportunities for Defence Therapeutics and Sino Biopharmaceutica

0.18

Correlation Coefficient

Defence Therapeutics  Sino Biopharmaceutica

Average diversification

The 3 months correlation between Defence and Sino is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Defence Therapeutics and Sino Biopharmaceutical Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sino Biopharmaceutical and Defence Therapeutics 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 Defence Therapeutics are associated (or correlated) with Sino Biopharmaceutica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sino Biopharmaceutical has no effect on the direction of Defence Therapeutics i.e., Defence Therapeutics and Sino Biopharmaceutica go up and down completely randomly.

Pair Corralation between Defence Therapeutics and Sino Biopharmaceutica

Assuming the 90 days horizon Defence Therapeutics is expected to under-perform the Sino Biopharmaceutica. In addition to that, Defence Therapeutics is 3.17 times more volatile than Sino Biopharmaceutical Ltd. It trades about -0.01 of its total potential returns per unit of risk. Sino Biopharmaceutical Ltd is currently generating about 0.04 per unit of volatility. If you would invest  669.00  in Sino Biopharmaceutical Ltd on October 21, 2024 and sell it today you would earn a total of  69.00  from holding Sino Biopharmaceutical Ltd or generate 10.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.22%
Values	Daily Returns

Defence Therapeutics  vs.  Sino Biopharmaceutical Ltd

Defence Therapeutics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Defence Therapeutics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical and fundamental indicators, Defence Therapeutics reported solid returns over the last few months and may actually be approaching a breakup point.

Sino Biopharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sino Biopharmaceutical Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Defence Therapeutics and Sino Biopharmaceutica

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

The idea behind Defence Therapeutics and Sino Biopharmaceutical Ltd 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 Transaction History module to view history of all your transactions and understand their impact on performance.