Correlation Between CHINA HUARONG and LIVZON PHARMAC
Can any of the company-specific risk be diversified away by investing in both CHINA HUARONG and LIVZON PHARMAC 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 HUARONG and LIVZON PHARMAC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHINA HUARONG ENERHD 50 and LIVZON PHARMAC GRP, you can compare the effects of market volatilities on CHINA HUARONG and LIVZON PHARMAC 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 HUARONG with a short position of LIVZON PHARMAC. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA HUARONG and LIVZON PHARMAC.
Diversification Opportunities for CHINA HUARONG and LIVZON PHARMAC
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CHINA and LIVZON is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding CHINA HUARONG ENERHD 50 and LIVZON PHARMAC GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIVZON PHARMAC GRP and CHINA HUARONG 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 HUARONG ENERHD 50 are associated (or correlated) with LIVZON PHARMAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIVZON PHARMAC GRP has no effect on the direction of CHINA HUARONG i.e., CHINA HUARONG and LIVZON PHARMAC go up and down completely randomly.
Pair Corralation between CHINA HUARONG and LIVZON PHARMAC
Assuming the 90 days trading horizon CHINA HUARONG ENERHD 50 is expected to generate 5.58 times more return on investment than LIVZON PHARMAC. However, CHINA HUARONG is 5.58 times more volatile than LIVZON PHARMAC GRP. It trades about 0.11 of its potential returns per unit of risk. LIVZON PHARMAC GRP is currently generating about 0.07 per unit of risk. If you would invest 0.50 in CHINA HUARONG ENERHD 50 on September 12, 2024 and sell it today you would lose (0.35) from holding CHINA HUARONG ENERHD 50 or give up 70.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHINA HUARONG ENERHD 50 vs. LIVZON PHARMAC GRP
Performance |
| Timeline |
| CHINA HUARONG ENERHD |
| LIVZON PHARMAC GRP |
CHINA HUARONG and LIVZON PHARMAC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA HUARONG and LIVZON PHARMAC
The main advantage of trading using opposite CHINA HUARONG and LIVZON PHARMAC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA HUARONG position performs unexpectedly, LIVZON PHARMAC 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 LIVZON PHARMAC will offset losses from the drop in LIVZON PHARMAC's long position.| CHINA HUARONG vs. Air Transport Services | CHINA HUARONG vs. Liberty Broadband | CHINA HUARONG vs. TEXAS ROADHOUSE | CHINA HUARONG vs. NORWEGIAN AIR SHUT |
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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 CEOs Directory module to screen CEOs from public companies around the world.
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