Correlation Between China SXT and CLS Holdings

Can any of the company-specific risk be diversified away by investing in both China SXT and CLS Holdings 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 CLS Holdings 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 CLS Holdings USA, you can compare the effects of market volatilities on China SXT and CLS Holdings 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 CLS Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of China SXT and CLS Holdings.

Diversification Opportunities for China SXT and CLS Holdings

0.08

Correlation Coefficient

China SXT  CLS Holdings

Significant diversification

The 3 months correlation between China and CLS is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding China SXT Pharmaceuticals and CLS Holdings USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLS Holdings USA 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 CLS Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLS Holdings USA has no effect on the direction of China SXT i.e., China SXT and CLS Holdings go up and down completely randomly.

Pair Corralation between China SXT and CLS Holdings

Given the investment horizon of 90 days China SXT Pharmaceuticals is expected to generate 1.52 times more return on investment than CLS Holdings. However, China SXT is 1.52 times more volatile than CLS Holdings USA. It trades about 0.06 of its potential returns per unit of risk. CLS Holdings USA is currently generating about 0.07 per unit of risk. If you would invest  273.00  in China SXT Pharmaceuticals on December 17, 2024 and sell it today you would lose (11.00) from holding China SXT Pharmaceuticals or give up 4.03% of portfolio value over 90 days.

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

China SXT Pharmaceuticals  vs.  CLS Holdings USA

China SXT Pharmaceuticals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China SXT Pharmaceuticals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, China SXT exhibited solid returns over the last few months and may actually be approaching a breakup point.

CLS Holdings USA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CLS Holdings USA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, CLS Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China SXT and CLS Holdings

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

The idea behind China SXT Pharmaceuticals and CLS Holdings USA 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 Stocks Directory module to find actively traded stocks across global markets.