Correlation Between Hisamitsu Pharmaceutical and Guangzhou Baiyunshan
Can any of the company-specific risk be diversified away by investing in both Hisamitsu Pharmaceutical and Guangzhou Baiyunshan 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 Hisamitsu Pharmaceutical and Guangzhou Baiyunshan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hisamitsu Pharmaceutical Co and Guangzhou Baiyunshan Pharmaceutical, you can compare the effects of market volatilities on Hisamitsu Pharmaceutical and Guangzhou Baiyunshan 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 Hisamitsu Pharmaceutical with a short position of Guangzhou Baiyunshan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hisamitsu Pharmaceutical and Guangzhou Baiyunshan.
Diversification Opportunities for Hisamitsu Pharmaceutical and Guangzhou Baiyunshan
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Hisamitsu and Guangzhou is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Hisamitsu Pharmaceutical Co and Guangzhou Baiyunshan Pharmaceu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Baiyunshan and Hisamitsu Pharmaceutical 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 Hisamitsu Pharmaceutical Co are associated (or correlated) with Guangzhou Baiyunshan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Baiyunshan has no effect on the direction of Hisamitsu Pharmaceutical i.e., Hisamitsu Pharmaceutical and Guangzhou Baiyunshan go up and down completely randomly.
Pair Corralation between Hisamitsu Pharmaceutical and Guangzhou Baiyunshan
Assuming the 90 days horizon Hisamitsu Pharmaceutical Co is expected to generate 2.67 times more return on investment than Guangzhou Baiyunshan. However, Hisamitsu Pharmaceutical is 2.67 times more volatile than Guangzhou Baiyunshan Pharmaceutical. It trades about 0.28 of its potential returns per unit of risk. Guangzhou Baiyunshan Pharmaceutical is currently generating about -0.17 per unit of risk. If you would invest 2,500 in Hisamitsu Pharmaceutical Co on October 15, 2024 and sell it today you would earn a total of 320.00 from holding Hisamitsu Pharmaceutical Co or generate 12.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hisamitsu Pharmaceutical Co vs. Guangzhou Baiyunshan Pharmaceu
Performance |
| Timeline |
| Hisamitsu Pharmaceutical |
| Guangzhou Baiyunshan |
Hisamitsu Pharmaceutical and Guangzhou Baiyunshan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hisamitsu Pharmaceutical and Guangzhou Baiyunshan
The main advantage of trading using opposite Hisamitsu Pharmaceutical and Guangzhou Baiyunshan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hisamitsu Pharmaceutical position performs unexpectedly, Guangzhou Baiyunshan 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 Guangzhou Baiyunshan will offset losses from the drop in Guangzhou Baiyunshan's long position.The idea behind Hisamitsu Pharmaceutical Co and Guangzhou Baiyunshan Pharmaceutical 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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