Correlation Between Sino Biopharmaceutica and Baudax BioInc

Can any of the company-specific risk be diversified away by investing in both Sino Biopharmaceutica and Baudax BioInc 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 Sino Biopharmaceutica and Baudax BioInc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sino Biopharmaceutical Limited and Baudax BioInc, you can compare the effects of market volatilities on Sino Biopharmaceutica and Baudax BioInc 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 Sino Biopharmaceutica with a short position of Baudax BioInc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sino Biopharmaceutica and Baudax BioInc.

Diversification Opportunities for Sino Biopharmaceutica and Baudax BioInc

-0.21

Correlation Coefficient

Sino Biopharmaceutica  Baudax BioInc

Very good diversification

The 3 months correlation between Sino and Baudax is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Sino Biopharmaceutical Limited and Baudax BioInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baudax BioInc and Sino Biopharmaceutica 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 Sino Biopharmaceutical Limited are associated (or correlated) with Baudax BioInc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baudax BioInc has no effect on the direction of Sino Biopharmaceutica i.e., Sino Biopharmaceutica and Baudax BioInc go up and down completely randomly.

Pair Corralation between Sino Biopharmaceutica and Baudax BioInc

Assuming the 90 days horizon Sino Biopharmaceutical Limited is expected to under-perform the Baudax BioInc. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sino Biopharmaceutical Limited is 2.9 times less risky than Baudax BioInc. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Baudax BioInc is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1.45  in Baudax BioInc on January 25, 2024 and sell it today you would lose (0.33) from holding Baudax BioInc or give up 22.76% of portfolio value over 90 days.

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

Sino Biopharmaceutical Limited  vs.  Baudax BioInc

Sino Biopharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Baudax BioInc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baudax BioInc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sino Biopharmaceutica and Baudax BioInc

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

The idea behind Sino Biopharmaceutical Limited and Baudax BioInc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.