Correlation Between VistaGen Therapeutics and China Pharma

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

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

Diversification Opportunities for VistaGen Therapeutics and China Pharma

0.82

Correlation Coefficient

VistaGen Therapeutics  China Pharma

Very poor diversification

The 3 months correlation between VistaGen and China is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding VistaGen Therapeutics and China Pharma Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Pharma Holdings and VistaGen Therapeutics 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 VistaGen Therapeutics are associated (or correlated) with China Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Pharma Holdings has no effect on the direction of VistaGen Therapeutics i.e., VistaGen Therapeutics and China Pharma go up and down completely randomly.

Pair Corralation between VistaGen Therapeutics and China Pharma

Given the investment horizon of 90 days VistaGen Therapeutics is expected to generate 5.62 times more return on investment than China Pharma. However, VistaGen Therapeutics is 5.62 times more volatile than China Pharma Holdings. It trades about 0.04 of its potential returns per unit of risk. China Pharma Holdings is currently generating about -0.05 per unit of risk. If you would invest  243.00  in VistaGen Therapeutics on October 3, 2024 and sell it today you would earn a total of  38.00  from holding VistaGen Therapeutics or generate 15.64% return on investment over 90 days.

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

VistaGen Therapeutics  vs.  China Pharma Holdings

VistaGen Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VistaGen Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, VistaGen Therapeutics is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

China Pharma Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Pharma Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, China Pharma is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with VistaGen Therapeutics and China Pharma

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

The idea behind VistaGen Therapeutics and China Pharma Holdings 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.