Correlation Between ASPEN PHARUNADR and Guangzhou Baiyunshan

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

By analyzing existing cross correlation between ASPEN PHARUNADR 1 and Guangzhou Baiyunshan Pharmaceutical, you can compare the effects of market volatilities on ASPEN PHARUNADR and Guangzhou Baiyunshan 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 ASPEN PHARUNADR with a short position of Guangzhou Baiyunshan. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASPEN PHARUNADR and Guangzhou Baiyunshan.

Diversification Opportunities for ASPEN PHARUNADR and Guangzhou Baiyunshan

0.17

Correlation Coefficient

ASPEN PHARUNADR  Guangzhou Baiyunshan

Average diversification

The 3 months correlation between ASPEN and Guangzhou is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding ASPEN PHARUNADR 1 and Guangzhou Baiyunshan Pharmaceu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Baiyunshan and ASPEN PHARUNADR 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 ASPEN PHARUNADR 1 are associated (or correlated) with Guangzhou Baiyunshan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Baiyunshan has no effect on the direction of ASPEN PHARUNADR i.e., ASPEN PHARUNADR and Guangzhou Baiyunshan go up and down completely randomly.

Pair Corralation between ASPEN PHARUNADR and Guangzhou Baiyunshan

Assuming the 90 days trading horizon ASPEN PHARUNADR 1 is expected to generate 1.87 times more return on investment than Guangzhou Baiyunshan. However, ASPEN PHARUNADR is 1.87 times more volatile than Guangzhou Baiyunshan Pharmaceutical. It trades about -0.08 of its potential returns per unit of risk. Guangzhou Baiyunshan Pharmaceutical is currently generating about -0.3 per unit of risk. If you would invest  880.00  in ASPEN PHARUNADR 1 on October 12, 2024 and sell it today you would lose (30.00) from holding ASPEN PHARUNADR 1 or give up 3.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

ASPEN PHARUNADR 1  vs.  Guangzhou Baiyunshan Pharmaceu

ASPEN PHARUNADR 1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASPEN PHARUNADR 1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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.

Pair Trading with ASPEN PHARUNADR and Guangzhou Baiyunshan

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

The idea behind ASPEN PHARUNADR 1 and Guangzhou Baiyunshan Pharmaceutical 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.