Correlation Between Piotech and Nanhua Bio

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Can any of the company-specific risk be diversified away by investing in both Piotech and Nanhua Bio 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 Piotech and Nanhua Bio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Piotech Inc A and Nanhua Bio Medicine, you can compare the effects of market volatilities on Piotech and Nanhua Bio 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 Piotech with a short position of Nanhua Bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Piotech and Nanhua Bio.

Diversification Opportunities for Piotech and Nanhua Bio

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Piotech and Nanhua is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Piotech Inc A and Nanhua Bio Medicine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanhua Bio Medicine and Piotech 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 Piotech Inc A are associated (or correlated) with Nanhua Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanhua Bio Medicine has no effect on the direction of Piotech i.e., Piotech and Nanhua Bio go up and down completely randomly.

Pair Corralation between Piotech and Nanhua Bio

Assuming the 90 days trading horizon Piotech Inc A is expected to under-perform the Nanhua Bio. In addition to that, Piotech is 1.02 times more volatile than Nanhua Bio Medicine. It trades about -0.01 of its total potential returns per unit of risk. Nanhua Bio Medicine is currently generating about 0.01 per unit of volatility. If you would invest  1,191  in Nanhua Bio Medicine on August 26, 2024 and sell it today you would lose (184.00) from holding Nanhua Bio Medicine or give up 15.45% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Piotech Inc A  vs.  Nanhua Bio Medicine

 Performance 
       Timeline  
Piotech Inc A 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Piotech Inc A are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Piotech sustained solid returns over the last few months and may actually be approaching a breakup point.
Nanhua Bio Medicine 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Nanhua Bio Medicine are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nanhua Bio sustained solid returns over the last few months and may actually be approaching a breakup point.

Piotech and Nanhua Bio Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Piotech and Nanhua Bio

The main advantage of trading using opposite Piotech and Nanhua Bio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Piotech position performs unexpectedly, Nanhua Bio 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 Nanhua Bio will offset losses from the drop in Nanhua Bio's long position.
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The idea behind Piotech Inc A and Nanhua Bio Medicine 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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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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