Correlation Between Sihuan Pharmaceutical and Benchmark Botanics

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

Diversification Opportunities for Sihuan Pharmaceutical and Benchmark Botanics

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Sihuan and Benchmark is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Sihuan Pharmaceutical Holdings and Benchmark Botanics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benchmark Botanics and Sihuan 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 Sihuan Pharmaceutical Holdings are associated (or correlated) with Benchmark Botanics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benchmark Botanics has no effect on the direction of Sihuan Pharmaceutical i.e., Sihuan Pharmaceutical and Benchmark Botanics go up and down completely randomly.

Pair Corralation between Sihuan Pharmaceutical and Benchmark Botanics

Assuming the 90 days horizon Sihuan Pharmaceutical is expected to generate 3.2 times less return on investment than Benchmark Botanics. But when comparing it to its historical volatility, Sihuan Pharmaceutical Holdings is 3.3 times less risky than Benchmark Botanics. It trades about 0.04 of its potential returns per unit of risk. Benchmark Botanics is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1.10  in Benchmark Botanics on November 5, 2024 and sell it today you would lose (0.76) from holding Benchmark Botanics or give up 69.09% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy83.0%
ValuesDaily Returns

Sihuan Pharmaceutical Holdings  vs.  Benchmark Botanics

 Performance 
       Timeline  
Sihuan Pharmaceutical 

Risk-Adjusted Performance

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Over the last 90 days Sihuan Pharmaceutical Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Sihuan Pharmaceutical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Benchmark Botanics 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Benchmark Botanics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, Benchmark Botanics is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Sihuan Pharmaceutical and Benchmark Botanics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sihuan Pharmaceutical and Benchmark Botanics

The main advantage of trading using opposite Sihuan Pharmaceutical and Benchmark Botanics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sihuan Pharmaceutical position performs unexpectedly, Benchmark Botanics 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 Benchmark Botanics will offset losses from the drop in Benchmark Botanics' long position.
The idea behind Sihuan Pharmaceutical Holdings and Benchmark Botanics 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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