Correlation Between CHINA DEVELOPMENT and Orient Pharma

Can any of the company-specific risk be diversified away by investing in both CHINA DEVELOPMENT and Orient Pharma 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 DEVELOPMENT and Orient Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CHINA DEVELOPMENT FINANCIAL and Orient Pharma Co, you can compare the effects of market volatilities on CHINA DEVELOPMENT and Orient Pharma 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 DEVELOPMENT with a short position of Orient Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA DEVELOPMENT and Orient Pharma.

Diversification Opportunities for CHINA DEVELOPMENT and Orient Pharma

0.88

Correlation Coefficient

CHINA DEVELOPMENT  Orient Pharma

Very poor diversification

The 3 months correlation between CHINA and Orient is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding CHINA DEVELOPMENT FINANCIAL and Orient Pharma Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Pharma and CHINA DEVELOPMENT 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 DEVELOPMENT FINANCIAL are associated (or correlated) with Orient Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orient Pharma has no effect on the direction of CHINA DEVELOPMENT i.e., CHINA DEVELOPMENT and Orient Pharma go up and down completely randomly.

Pair Corralation between CHINA DEVELOPMENT and Orient Pharma

Assuming the 90 days trading horizon CHINA DEVELOPMENT is expected to generate 11.36 times less return on investment than Orient Pharma. But when comparing it to its historical volatility, CHINA DEVELOPMENT FINANCIAL is 4.26 times less risky than Orient Pharma. It trades about 0.02 of its potential returns per unit of risk. Orient Pharma Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,080  in Orient Pharma Co on September 23, 2024 and sell it today you would earn a total of  1,620  from holding Orient Pharma Co or generate 77.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

CHINA DEVELOPMENT FINANCIAL  vs.  Orient Pharma Co

CHINA DEVELOPMENT

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA DEVELOPMENT FINANCIAL are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, CHINA DEVELOPMENT is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Orient Pharma

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Orient Pharma Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Orient Pharma showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHINA DEVELOPMENT and Orient Pharma

The main advantage of trading using opposite CHINA DEVELOPMENT and Orient Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA DEVELOPMENT position performs unexpectedly, Orient Pharma 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 Orient Pharma will offset losses from the drop in Orient Pharma's long position.

The idea behind CHINA DEVELOPMENT FINANCIAL and Orient Pharma Co 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.