Correlation Between Elite Pharma and Wuhan General

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

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

Diversification Opportunities for Elite Pharma and Wuhan General

-0.54

Correlation Coefficient

Elite Pharma  Wuhan General

Excellent diversification

The 3 months correlation between Elite and Wuhan is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Elite Pharma and Wuhan General Gr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wuhan General Gr and Elite 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 Elite Pharma are associated (or correlated) with Wuhan General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wuhan General Gr has no effect on the direction of Elite Pharma i.e., Elite Pharma and Wuhan General go up and down completely randomly.

Pair Corralation between Elite Pharma and Wuhan General

Given the investment horizon of 90 days Elite Pharma is expected to generate 9.68 times less return on investment than Wuhan General. But when comparing it to its historical volatility, Elite Pharma is 8.43 times less risky than Wuhan General. It trades about 0.07 of its potential returns per unit of risk. Wuhan General Gr is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4.00  in Wuhan General Gr on September 29, 2024 and sell it today you would lose (3.96) from holding Wuhan General Gr or give up 99.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.26%
Values	Daily Returns

Elite Pharma  vs.  Wuhan General Gr

Elite Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elite Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Elite Pharma is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Wuhan General Gr

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Elite Pharma and Wuhan General

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

The idea behind Elite Pharma and Wuhan General Gr 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.