Correlation Between Shanrong Biotechnology and China De

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

By analyzing existing cross correlation between Shanrong Biotechnology Corp and China De Xiao, you can compare the effects of market volatilities on Shanrong Biotechnology and China De 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 Shanrong Biotechnology with a short position of China De. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanrong Biotechnology and China De.

Diversification Opportunities for Shanrong Biotechnology and China De

0.7

Correlation Coefficient

Shanrong Biotechnology  China De

Poor diversification

The 3 months correlation between Shanrong and China is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Shanrong Biotechnology Corp and China De Xiao in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China De Xiao and Shanrong Biotechnology 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 Shanrong Biotechnology Corp are associated (or correlated) with China De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China De Xiao has no effect on the direction of Shanrong Biotechnology i.e., Shanrong Biotechnology and China De go up and down completely randomly.

Pair Corralation between Shanrong Biotechnology and China De

If you would invest  11.00  in Shanrong Biotechnology Corp on October 25, 2024 and sell it today you would earn a total of  89.00  from holding Shanrong Biotechnology Corp or generate 809.09% return on investment over 90 days.

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

Shanrong Biotechnology Corp  vs.  China De Xiao

Shanrong Biotechnology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shanrong Biotechnology Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent fundamental drivers, Shanrong Biotechnology unveiled solid returns over the last few months and may actually be approaching a breakup point.

China De Xiao

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China De Xiao has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Shanrong Biotechnology and China De

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

The idea behind Shanrong Biotechnology Corp and China De Xiao 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.