Correlation Between Shanghai Pharmaceuticals and SINOPHARM GROUP

Can any of the company-specific risk be diversified away by investing in both Shanghai Pharmaceuticals and SINOPHARM GROUP 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 SINOPHARM GROUP 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 SINOPHARM GROUP 15ON, you can compare the effects of market volatilities on Shanghai Pharmaceuticals and SINOPHARM GROUP 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 SINOPHARM GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Pharmaceuticals and SINOPHARM GROUP.

Diversification Opportunities for Shanghai Pharmaceuticals and SINOPHARM GROUP

0.91

Correlation Coefficient

Shanghai Pharmaceuticals  SINOPHARM GROUP

Almost no diversification

The 3 months correlation between Shanghai and SINOPHARM is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Pharmaceuticals Holdi and SINOPHARM GROUP 15ON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SINOPHARM GROUP 15ON 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 SINOPHARM GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SINOPHARM GROUP 15ON has no effect on the direction of Shanghai Pharmaceuticals i.e., Shanghai Pharmaceuticals and SINOPHARM GROUP go up and down completely randomly.

Pair Corralation between Shanghai Pharmaceuticals and SINOPHARM GROUP

Assuming the 90 days horizon Shanghai Pharmaceuticals Holding is expected to generate 0.94 times more return on investment than SINOPHARM GROUP. However, Shanghai Pharmaceuticals Holding is 1.07 times less risky than SINOPHARM GROUP. It trades about -0.14 of its potential returns per unit of risk. SINOPHARM GROUP 15ON is currently generating about -0.24 per unit of risk. If you would invest  153.00  in Shanghai Pharmaceuticals Holding on December 29, 2024 and sell it today you would lose (17.00) from holding Shanghai Pharmaceuticals Holding or give up 11.11% of portfolio value over 90 days.

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

Shanghai Pharmaceuticals Holdi  vs.  SINOPHARM GROUP 15ON

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

SINOPHARM GROUP 15ON

Risk-Adjusted Performance

Very Weak

Over the last 90 days SINOPHARM GROUP 15ON 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.

Pair Trading with Shanghai Pharmaceuticals and SINOPHARM GROUP

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

The idea behind Shanghai Pharmaceuticals Holding and SINOPHARM GROUP 15ON 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.