Correlation Between Guangzhou Baiyunshan and Hisamitsu Pharmaceutical

Can any of the company-specific risk be diversified away by investing in both Guangzhou Baiyunshan and Hisamitsu Pharmaceutical 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 Hisamitsu Pharmaceutical 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 Hisamitsu Pharmaceutical Co, you can compare the effects of market volatilities on Guangzhou Baiyunshan and Hisamitsu Pharmaceutical 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 Hisamitsu Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Baiyunshan and Hisamitsu Pharmaceutical.

Diversification Opportunities for Guangzhou Baiyunshan and Hisamitsu Pharmaceutical

0.09

Correlation Coefficient

Guangzhou Baiyunshan  Hisamitsu Pharmaceutical

Significant diversification

The 3 months correlation between Guangzhou and Hisamitsu is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Baiyunshan Pharmaceu and Hisamitsu Pharmaceutical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hisamitsu Pharmaceutical 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 Hisamitsu Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hisamitsu Pharmaceutical has no effect on the direction of Guangzhou Baiyunshan i.e., Guangzhou Baiyunshan and Hisamitsu Pharmaceutical go up and down completely randomly.

Pair Corralation between Guangzhou Baiyunshan and Hisamitsu Pharmaceutical

Assuming the 90 days horizon Guangzhou Baiyunshan Pharmaceutical is expected to generate 2.24 times more return on investment than Hisamitsu Pharmaceutical. However, Guangzhou Baiyunshan is 2.24 times more volatile than Hisamitsu Pharmaceutical Co. It trades about 0.09 of its potential returns per unit of risk. Hisamitsu Pharmaceutical Co is currently generating about 0.08 per unit of risk. If you would invest  179.00  in Guangzhou Baiyunshan Pharmaceutical on October 12, 2024 and sell it today you would earn a total of  27.00  from holding Guangzhou Baiyunshan Pharmaceutical or generate 15.08% return on investment over 90 days.

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

Guangzhou Baiyunshan Pharmaceu  vs.  Hisamitsu Pharmaceutical Co

Guangzhou Baiyunshan

Risk-Adjusted Performance

7 of 100

OK

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

Hisamitsu Pharmaceutical

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hisamitsu Pharmaceutical Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hisamitsu Pharmaceutical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Guangzhou Baiyunshan and Hisamitsu Pharmaceutical

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

The idea behind Guangzhou Baiyunshan Pharmaceutical and Hisamitsu Pharmaceutical 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.