Correlation Between SNDL and China Pharma

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

By analyzing existing cross correlation between SNDL Inc and China Pharma Holdings, you can compare the effects of market volatilities on SNDL and China 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 SNDL with a short position of China Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of SNDL and China Pharma.

Diversification Opportunities for SNDL and China Pharma

0.72

Correlation Coefficient

SNDL  China Pharma

Poor diversification

The 3 months correlation between SNDL and China is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding SNDL Inc and China Pharma Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Pharma Holdings and SNDL 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 SNDL Inc are associated (or correlated) with China Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Pharma Holdings has no effect on the direction of SNDL i.e., SNDL and China Pharma go up and down completely randomly.

Pair Corralation between SNDL and China Pharma

Given the investment horizon of 90 days SNDL Inc is expected to under-perform the China Pharma. But the stock apears to be less risky and, when comparing its historical volatility, SNDL Inc is 2.75 times less risky than China Pharma. The stock trades about -0.15 of its potential returns per unit of risk. The China Pharma Holdings is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  20.00  in China Pharma Holdings on October 1, 2024 and sell it today you would lose (1.69) from holding China Pharma Holdings or give up 8.45% of portfolio value over 90 days.

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

SNDL Inc  vs.  China Pharma Holdings

SNDL Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SNDL Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

China Pharma Holdings

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days China Pharma Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with SNDL and China Pharma

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

The idea behind SNDL Inc and China Pharma Holdings 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.