Correlation Between Alphabet and Jinhe Biotechnology

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

By analyzing existing cross correlation between Alphabet Inc Class C and Jinhe Biotechnology Co, you can compare the effects of market volatilities on Alphabet and Jinhe Biotechnology 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 Alphabet with a short position of Jinhe Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Jinhe Biotechnology.

Diversification Opportunities for Alphabet and Jinhe Biotechnology

0.71

Correlation Coefficient

Alphabet  Jinhe Biotechnology

Poor diversification

The 3 months correlation between Alphabet and Jinhe is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Jinhe Biotechnology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinhe Biotechnology and Alphabet 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 Alphabet Inc Class C are associated (or correlated) with Jinhe Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinhe Biotechnology has no effect on the direction of Alphabet i.e., Alphabet and Jinhe Biotechnology go up and down completely randomly.

Pair Corralation between Alphabet and Jinhe Biotechnology

Given the investment horizon of 90 days Alphabet is expected to generate 3.07 times less return on investment than Jinhe Biotechnology. But when comparing it to its historical volatility, Alphabet Inc Class C is 1.51 times less risky than Jinhe Biotechnology. It trades about 0.11 of its potential returns per unit of risk. Jinhe Biotechnology Co is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  358.00  in Jinhe Biotechnology Co on September 4, 2024 and sell it today you would earn a total of  110.00  from holding Jinhe Biotechnology Co or generate 30.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	92.06%
Values	Daily Returns

Alphabet Inc Class C  vs.  Jinhe Biotechnology Co

Alphabet Class C

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Alphabet may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Jinhe Biotechnology

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jinhe Biotechnology Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jinhe Biotechnology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and Jinhe Biotechnology

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

The idea behind Alphabet Inc Class C and Jinhe Biotechnology Co 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.