Correlation Between Shanghai Pharmaceuticals and Henry Schein

Can any of the company-specific risk be diversified away by investing in both Shanghai Pharmaceuticals and Henry Schein 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 Henry Schein 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 Henry Schein, you can compare the effects of market volatilities on Shanghai Pharmaceuticals and Henry Schein 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 Henry Schein. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Pharmaceuticals and Henry Schein.

Diversification Opportunities for Shanghai Pharmaceuticals and Henry Schein

0.38

Correlation Coefficient

Shanghai Pharmaceuticals  Henry Schein

Weak diversification

The 3 months correlation between Shanghai and Henry is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Pharmaceuticals Holdi and Henry Schein in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henry Schein 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 Henry Schein. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henry Schein has no effect on the direction of Shanghai Pharmaceuticals i.e., Shanghai Pharmaceuticals and Henry Schein go up and down completely randomly.

Pair Corralation between Shanghai Pharmaceuticals and Henry Schein

Assuming the 90 days horizon Shanghai Pharmaceuticals Holding is expected to under-perform the Henry Schein. But the stock apears to be less risky and, when comparing its historical volatility, Shanghai Pharmaceuticals Holding is 1.39 times less risky than Henry Schein. The stock trades about -0.18 of its potential returns per unit of risk. The Henry Schein is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  6,778  in Henry Schein on December 27, 2024 and sell it today you would lose (344.00) from holding Henry Schein or give up 5.08% of portfolio value over 90 days.

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

Shanghai Pharmaceuticals Holdi  vs.  Henry Schein

Shanghai Pharmaceuticals

Risk-Adjusted Performance

Very Weak

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

Henry Schein

Risk-Adjusted Performance

Very Weak

Over the last 90 days Henry Schein has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Henry Schein is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Shanghai Pharmaceuticals and Henry Schein

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

The idea behind Shanghai Pharmaceuticals Holding and Henry Schein 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.