Correlation Between China SXT and Eagle Pharmaceuticals

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Can any of the company-specific risk be diversified away by investing in both China SXT and Eagle Pharmaceuticals 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 Eagle Pharmaceuticals 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 Eagle Pharmaceuticals, you can compare the effects of market volatilities on China SXT and Eagle Pharmaceuticals 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 Eagle Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of China SXT and Eagle Pharmaceuticals.

Diversification Opportunities for China SXT and Eagle Pharmaceuticals

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between China and Eagle is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding China SXT Pharmaceuticals and Eagle Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Pharmaceuticals 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 Eagle Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Pharmaceuticals has no effect on the direction of China SXT i.e., China SXT and Eagle Pharmaceuticals go up and down completely randomly.

Pair Corralation between China SXT and Eagle Pharmaceuticals

Given the investment horizon of 90 days China SXT Pharmaceuticals is expected to generate 0.67 times more return on investment than Eagle Pharmaceuticals. However, China SXT Pharmaceuticals is 1.49 times less risky than Eagle Pharmaceuticals. It trades about -0.1 of its potential returns per unit of risk. Eagle Pharmaceuticals is currently generating about -0.08 per unit of risk. If you would invest  121.00  in China SXT Pharmaceuticals on March 21, 2024 and sell it today you would lose (13.00) from holding China SXT Pharmaceuticals or give up 10.74% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

China SXT Pharmaceuticals  vs.  Eagle Pharmaceuticals

 Performance 
       Timeline  
China SXT Pharmaceuticals 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days China SXT Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in July 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
Eagle Pharmaceuticals 

Risk-Adjusted Performance

0 of 100

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

China SXT and Eagle Pharmaceuticals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with China SXT and Eagle Pharmaceuticals

The main advantage of trading using opposite China SXT and Eagle Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China SXT position performs unexpectedly, Eagle Pharmaceuticals 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 Eagle Pharmaceuticals will offset losses from the drop in Eagle Pharmaceuticals' long position.
The idea behind China SXT Pharmaceuticals and Eagle Pharmaceuticals 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.
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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