Correlation Between Living Cell and Sino Biopharmaceutica

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

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

Diversification Opportunities for Living Cell and Sino Biopharmaceutica

0.26

Correlation Coefficient

Living Cell  Sino Biopharmaceutica

Modest diversification

The 3 months correlation between Living and Sino is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Living Cell Technologies and Sino Biopharmaceutical Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sino Biopharmaceutical and Living Cell 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 Living Cell Technologies 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 Living Cell i.e., Living Cell and Sino Biopharmaceutica go up and down completely randomly.

Pair Corralation between Living Cell and Sino Biopharmaceutica

Assuming the 90 days horizon Living Cell Technologies is expected to generate 17.95 times more return on investment than Sino Biopharmaceutica. However, Living Cell is 17.95 times more volatile than Sino Biopharmaceutical Ltd. It trades about 0.15 of its potential returns per unit of risk. Sino Biopharmaceutical Ltd is currently generating about 0.08 per unit of risk. If you would invest  0.16  in Living Cell Technologies on December 28, 2024 and sell it today you would earn a total of  0.24  from holding Living Cell Technologies or generate 150.0% return on investment over 90 days.

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

Living Cell Technologies  vs.  Sino Biopharmaceutical Ltd

Living Cell Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Living Cell Technologies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Living Cell reported solid returns over the last few months and may actually be approaching a breakup point.

Sino Biopharmaceutical

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sino Biopharmaceutical Ltd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain primary indicators, Sino Biopharmaceutica showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Living Cell and Sino Biopharmaceutica

The main advantage of trading using opposite Living Cell and Sino Biopharmaceutica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Living Cell 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 Living Cell Technologies and Sino Biopharmaceutical Ltd 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 Valuation module to check real value of public entities based on technical and fundamental data.