Correlation Between Er Therapeutics and China Power

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

By analyzing existing cross correlation between Er Therapeutics and China Power Equipment, you can compare the effects of market volatilities on Er Therapeutics and China Power 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 Er Therapeutics with a short position of China Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Er Therapeutics and China Power.

Diversification Opportunities for Er Therapeutics and China Power

-1.0

Correlation Coefficient

Er Therapeutics  China Power

Pay attention - limited upside

The 3 months correlation between PNGM and China is -1.0. Overlapping area represents the amount of risk that can be diversified away by holding Er Therapeutics and China Power Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Power Equipment and Er Therapeutics 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 Er Therapeutics are associated (or correlated) with China Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Power Equipment has no effect on the direction of Er Therapeutics i.e., Er Therapeutics and China Power go up and down completely randomly.

Pair Corralation between Er Therapeutics and China Power

If you would invest  0.52  in China Power Equipment on October 11, 2024 and sell it today you would earn a total of  0.00  from holding China Power Equipment or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Strong
Accuracy	95.35%
Values	Daily Returns

Er Therapeutics  vs.  China Power Equipment

Er Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Er Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Er Therapeutics is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

China Power Equipment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Power Equipment has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, China Power is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Er Therapeutics and China Power

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

The idea behind Er Therapeutics and China Power Equipment 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.