Correlation Between Sino Biopharmaceutica and Lumos Pharma

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

By analyzing existing cross correlation between Sino Biopharmaceutical Limited and Lumos Pharma, you can compare the effects of market volatilities on Sino Biopharmaceutica and Lumos Pharma 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 Lumos Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sino Biopharmaceutica and Lumos Pharma.

Diversification Opportunities for Sino Biopharmaceutica and Lumos Pharma

0.19

Correlation Coefficient

Sino Biopharmaceutica  Lumos Pharma

Average diversification

The 3 months correlation between Sino and Lumos is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Sino Biopharmaceutical Limited and Lumos Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumos Pharma 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 Limited are associated (or correlated) with Lumos Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumos Pharma has no effect on the direction of Sino Biopharmaceutica i.e., Sino Biopharmaceutica and Lumos Pharma go up and down completely randomly.

Pair Corralation between Sino Biopharmaceutica and Lumos Pharma

Assuming the 90 days horizon Sino Biopharmaceutica is expected to generate 1.05 times less return on investment than Lumos Pharma. But when comparing it to its historical volatility, Sino Biopharmaceutical Limited is 1.36 times less risky than Lumos Pharma. It trades about 0.08 of its potential returns per unit of risk. Lumos Pharma is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  393.00  in Lumos Pharma on September 2, 2024 and sell it today you would earn a total of  37.00  from holding Lumos Pharma or generate 9.41% return on investment over 90 days.

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

Sino Biopharmaceutical Limited  vs.  Lumos Pharma

Sino Biopharmaceutical

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sino Biopharmaceutical Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical and fundamental indicators, Sino Biopharmaceutica may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lumos Pharma

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lumos Pharma are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Lumos Pharma may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sino Biopharmaceutica and Lumos Pharma

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

The idea behind Sino Biopharmaceutical Limited and Lumos Pharma 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 Anywhere module to track or share privately all of your investments from the convenience of any device.