Correlation Between IGG and Sino Biopharmaceutica

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

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

Diversification Opportunities for IGG and Sino Biopharmaceutica

-0.27

Correlation Coefficient

IGG  Sino Biopharmaceutica

Very good diversification

The 3 months correlation between IGG and Sino is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding IGG Inc and Sino Biopharmaceutical Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sino Biopharmaceutical and IGG 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 IGG Inc 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 IGG i.e., IGG and Sino Biopharmaceutica go up and down completely randomly.

Pair Corralation between IGG and Sino Biopharmaceutica

Assuming the 90 days horizon IGG is expected to generate 46.63 times less return on investment than Sino Biopharmaceutica. But when comparing it to its historical volatility, IGG Inc is 1.73 times less risky than Sino Biopharmaceutica. It trades about 0.01 of its potential returns per unit of risk. Sino Biopharmaceutical Limited is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  37.00  in Sino Biopharmaceutical Limited on December 2, 2024 and sell it today you would earn a total of  5.00  from holding Sino Biopharmaceutical Limited or generate 13.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

IGG Inc  vs.  Sino Biopharmaceutical Limited

IGG Inc

Risk-Adjusted Performance

OK

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

Sino Biopharmaceutical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sino Biopharmaceutical Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Sino Biopharmaceutica is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IGG and Sino Biopharmaceutica

The main advantage of trading using opposite IGG and Sino Biopharmaceutica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IGG 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 IGG Inc and Sino Biopharmaceutical Limited 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.

Check out your portfolio center.

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 Global Correlations module to find global opportunities by holding instruments from different markets.