Correlation Between Shanghai Pharmaceuticals and AmerisourceBergen

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

By analyzing existing cross correlation between Shanghai Pharmaceuticals Holding and AmerisourceBergen, you can compare the effects of market volatilities on Shanghai Pharmaceuticals and AmerisourceBergen 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 Shanghai Pharmaceuticals with a short position of AmerisourceBergen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Pharmaceuticals and AmerisourceBergen.

Diversification Opportunities for Shanghai Pharmaceuticals and AmerisourceBergen

0.57

Correlation Coefficient

Shanghai Pharmaceuticals  AmerisourceBergen

Very weak diversification

The 3 months correlation between Shanghai and AmerisourceBergen is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Pharmaceuticals Holdi and AmerisourceBergen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmerisourceBergen and Shanghai Pharmaceuticals 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 Shanghai Pharmaceuticals Holding are associated (or correlated) with AmerisourceBergen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmerisourceBergen has no effect on the direction of Shanghai Pharmaceuticals i.e., Shanghai Pharmaceuticals and AmerisourceBergen go up and down completely randomly.

Pair Corralation between Shanghai Pharmaceuticals and AmerisourceBergen

Assuming the 90 days horizon Shanghai Pharmaceuticals Holding is expected to generate 1.62 times more return on investment than AmerisourceBergen. However, Shanghai Pharmaceuticals is 1.62 times more volatile than AmerisourceBergen. It trades about 0.2 of its potential returns per unit of risk. AmerisourceBergen is currently generating about -0.32 per unit of risk. If you would invest  147.00  in Shanghai Pharmaceuticals Holding on September 23, 2024 and sell it today you would earn a total of  11.00  from holding Shanghai Pharmaceuticals Holding or generate 7.48% return on investment over 90 days.

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

Shanghai Pharmaceuticals Holdi  vs.  AmerisourceBergen

Shanghai Pharmaceuticals

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Pharmaceuticals Holding are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Shanghai Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

AmerisourceBergen

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AmerisourceBergen are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AmerisourceBergen may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Shanghai Pharmaceuticals and AmerisourceBergen

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

The idea behind Shanghai Pharmaceuticals Holding and AmerisourceBergen 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..