Correlation Between China SXT and C21 Investments

Can any of the company-specific risk be diversified away by investing in both China SXT and C21 Investments 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 C21 Investments 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 C21 Investments, you can compare the effects of market volatilities on China SXT and C21 Investments 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 C21 Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of China SXT and C21 Investments.

Diversification Opportunities for China SXT and C21 Investments

-0.2

Correlation Coefficient

China SXT  C21 Investments

Good diversification

The 3 months correlation between China and C21 is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding China SXT Pharmaceuticals and C21 Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on C21 Investments 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 C21 Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of C21 Investments has no effect on the direction of China SXT i.e., China SXT and C21 Investments go up and down completely randomly.

Pair Corralation between China SXT and C21 Investments

Given the investment horizon of 90 days China SXT Pharmaceuticals is expected to generate 3.22 times more return on investment than C21 Investments. However, China SXT is 3.22 times more volatile than C21 Investments. It trades about 0.06 of its potential returns per unit of risk. C21 Investments is currently generating about -0.03 per unit of risk. If you would invest  268.00  in China SXT Pharmaceuticals on December 18, 2024 and sell it today you would lose (6.00) from holding China SXT Pharmaceuticals or give up 2.24% of portfolio value over 90 days.

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

China SXT Pharmaceuticals  vs.  C21 Investments

China SXT Pharmaceuticals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China SXT Pharmaceuticals are ranked lower than 5 (%) 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.

C21 Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days C21 Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with China SXT and C21 Investments

The main advantage of trading using opposite China SXT and C21 Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China SXT position performs unexpectedly, C21 Investments 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 C21 Investments will offset losses from the drop in C21 Investments' long position.

The idea behind China SXT Pharmaceuticals and C21 Investments 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.