Correlation Between China SXT and Allied Corp
Can any of the company-specific risk be diversified away by investing in both China SXT and Allied Corp 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 China SXT and Allied Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China SXT Pharmaceuticals and Allied Corp, you can compare the effects of market volatilities on China SXT and Allied Corp 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 China SXT with a short position of Allied Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of China SXT and Allied Corp.
Diversification Opportunities for China SXT and Allied Corp
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between China and Allied is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding China SXT Pharmaceuticals and Allied Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Corp and China SXT 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 China SXT Pharmaceuticals are associated (or correlated) with Allied Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Corp has no effect on the direction of China SXT i.e., China SXT and Allied Corp go up and down completely randomly.
Pair Corralation between China SXT and Allied Corp
Given the investment horizon of 90 days China SXT Pharmaceuticals is expected to under-perform the Allied Corp. But the stock apears to be less risky and, when comparing its historical volatility, China SXT Pharmaceuticals is 1.9 times less risky than Allied Corp. The stock trades about -0.05 of its potential returns per unit of risk. The Allied Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 24.00 in Allied Corp on August 26, 2024 and sell it today you would lose (19.26) from holding Allied Corp or give up 80.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China SXT Pharmaceuticals vs. Allied Corp
Performance |
| Timeline |
| China SXT Pharmaceuticals |
| Allied Corp |
China SXT and Allied Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China SXT and Allied Corp
The main advantage of trading using opposite China SXT and Allied Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China SXT position performs unexpectedly, Allied Corp 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 Allied Corp will offset losses from the drop in Allied Corp's long position.| China SXT vs. Akanda Corp | China SXT vs. Petros Pharmaceuticals | China SXT vs. GelStat Corp | China SXT vs. Shuttle Pharmaceuticals |
| Allied Corp vs. The BC Bud | Allied Corp vs. Amexdrug | Allied Corp vs. Aion Therapeutic | Allied Corp vs. Antisense Therapeutics Limited |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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