Correlation Between China SXT and Bright Green

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

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

Diversification Opportunities for China SXT and Bright Green

0.27

Correlation Coefficient

China SXT  Bright Green

Modest diversification

The 3 months correlation between China and Bright is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding China SXT Pharmaceuticals and Bright Green Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Green Corp and China SXT 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 China SXT Pharmaceuticals are associated (or correlated) with Bright Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Green Corp has no effect on the direction of China SXT i.e., China SXT and Bright Green go up and down completely randomly.

Pair Corralation between China SXT and Bright Green

Given the investment horizon of 90 days China SXT Pharmaceuticals is expected to generate 0.24 times more return on investment than Bright Green. However, China SXT Pharmaceuticals is 4.16 times less risky than Bright Green. It trades about -0.06 of its potential returns per unit of risk. Bright Green Corp is currently generating about -0.23 per unit of risk. If you would invest  69.00  in China SXT Pharmaceuticals on October 18, 2024 and sell it today you would lose (30.00) from holding China SXT Pharmaceuticals or give up 43.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	9.76%
Values	Daily Returns

China SXT Pharmaceuticals  vs.  Bright Green Corp

China SXT Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China SXT Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Bright Green Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bright Green Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Bright Green is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China SXT and Bright Green

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

The idea behind China SXT Pharmaceuticals and Bright Green Corp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.