Correlation Between Universe Pharmaceuticals and China SXT

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

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

Diversification Opportunities for Universe Pharmaceuticals and China SXT

0.71

Correlation Coefficient

Universe Pharmaceuticals  China SXT

Poor diversification

The 3 months correlation between Universe and China is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Universe Pharmaceuticals and China SXT Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China SXT Pharmaceuticals and Universe Pharmaceuticals 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 Universe Pharmaceuticals are associated (or correlated) with China SXT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China SXT Pharmaceuticals has no effect on the direction of Universe Pharmaceuticals i.e., Universe Pharmaceuticals and China SXT go up and down completely randomly.

Pair Corralation between Universe Pharmaceuticals and China SXT

Considering the 90-day investment horizon Universe Pharmaceuticals is expected to under-perform the China SXT. But the stock apears to be less risky and, when comparing its historical volatility, Universe Pharmaceuticals is 1.0 times less risky than China SXT. The stock trades about -0.47 of its potential returns per unit of risk. The China SXT Pharmaceuticals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  48.00  in China SXT Pharmaceuticals on October 8, 2024 and sell it today you would earn a total of  4.00  from holding China SXT Pharmaceuticals or generate 8.33% return on investment over 90 days.

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

Universe Pharmaceuticals  vs.  China SXT Pharmaceuticals

Universe Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universe Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather conflicting basic indicators, Universe Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 latest unfluctuating performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Universe Pharmaceuticals and China SXT

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

The idea behind Universe Pharmaceuticals and China SXT Pharmaceuticals 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.