Correlation Between Sino Biopharmaceutica and Institute

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

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

Diversification Opportunities for Sino Biopharmaceutica and Institute

0.1

Correlation Coefficient

Sino Biopharmaceutica  Institute

Average diversification

The 3 months correlation between Sino and Institute is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Sino Biopharmaceutical Ltd and Institute of Biomedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Institute of Biomedical and Sino Biopharmaceutica 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 Sino Biopharmaceutical Ltd are associated (or correlated) with Institute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Institute of Biomedical has no effect on the direction of Sino Biopharmaceutica i.e., Sino Biopharmaceutica and Institute go up and down completely randomly.

Pair Corralation between Sino Biopharmaceutica and Institute

Assuming the 90 days horizon Sino Biopharmaceutica is expected to generate 6.39 times less return on investment than Institute. But when comparing it to its historical volatility, Sino Biopharmaceutical Ltd is 5.29 times less risky than Institute. It trades about 0.08 of its potential returns per unit of risk. Institute of Biomedical is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  0.49  in Institute of Biomedical on September 13, 2024 and sell it today you would earn a total of  0.25  from holding Institute of Biomedical or generate 51.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Sino Biopharmaceutical Ltd  vs.  Institute of Biomedical

Sino Biopharmaceutical

Risk-Adjusted Performance

6 of 100

Modest

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.

Institute of Biomedical

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Institute of Biomedical are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Institute unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sino Biopharmaceutica and Institute

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

The idea behind Sino Biopharmaceutical Ltd and Institute of Biomedical 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.