Correlation Between Guangzhou Baiyunshan and HANSOH PHARMAC

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

By analyzing existing cross correlation between Guangzhou Baiyunshan Pharmaceutical and HANSOH PHARMAC HD 00001, you can compare the effects of market volatilities on Guangzhou Baiyunshan and HANSOH PHARMAC 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 Guangzhou Baiyunshan with a short position of HANSOH PHARMAC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Baiyunshan and HANSOH PHARMAC.

Diversification Opportunities for Guangzhou Baiyunshan and HANSOH PHARMAC

0.33

Correlation Coefficient

Guangzhou Baiyunshan  HANSOH PHARMAC

Weak diversification

The 3 months correlation between Guangzhou and HANSOH is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Baiyunshan Pharmaceu and HANSOH PHARMAC HD 00001 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANSOH PHARMAC HD and Guangzhou Baiyunshan 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 Guangzhou Baiyunshan Pharmaceutical are associated (or correlated) with HANSOH PHARMAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HANSOH PHARMAC HD has no effect on the direction of Guangzhou Baiyunshan i.e., Guangzhou Baiyunshan and HANSOH PHARMAC go up and down completely randomly.

Pair Corralation between Guangzhou Baiyunshan and HANSOH PHARMAC

Assuming the 90 days horizon Guangzhou Baiyunshan is expected to generate 49.01 times less return on investment than HANSOH PHARMAC. But when comparing it to its historical volatility, Guangzhou Baiyunshan Pharmaceutical is 3.16 times less risky than HANSOH PHARMAC. It trades about 0.01 of its potential returns per unit of risk. HANSOH PHARMAC HD 00001 is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  214.00  in HANSOH PHARMAC HD 00001 on December 27, 2024 and sell it today you would earn a total of  42.00  from holding HANSOH PHARMAC HD 00001 or generate 19.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Guangzhou Baiyunshan Pharmaceu  vs.  HANSOH PHARMAC HD 00001

Guangzhou Baiyunshan

Risk-Adjusted Performance

Very Weak

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

HANSOH PHARMAC HD

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HANSOH PHARMAC HD 00001 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, HANSOH PHARMAC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangzhou Baiyunshan and HANSOH PHARMAC

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

The idea behind Guangzhou Baiyunshan Pharmaceutical and HANSOH PHARMAC HD 00001 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.