Correlation Between WuXi Biologics and CSL

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

By analyzing existing cross correlation between WuXi Biologics and CSL, you can compare the effects of market volatilities on WuXi Biologics and CSL 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 WuXi Biologics with a short position of CSL. Check out your portfolio center. Please also check ongoing floating volatility patterns of WuXi Biologics and CSL.

Diversification Opportunities for WuXi Biologics and CSL

0.43

Correlation Coefficient

WuXi Biologics  CSL

Very weak diversification

The 3 months correlation between WuXi and CSL is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding WuXi Biologics and CSL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL and WuXi Biologics 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 WuXi Biologics are associated (or correlated) with CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL has no effect on the direction of WuXi Biologics i.e., WuXi Biologics and CSL go up and down completely randomly.

Pair Corralation between WuXi Biologics and CSL

Assuming the 90 days horizon WuXi Biologics is expected to under-perform the CSL. In addition to that, WuXi Biologics is 6.59 times more volatile than CSL. It trades about -0.08 of its total potential returns per unit of risk. CSL is currently generating about -0.16 per unit of volatility. If you would invest  9,213  in CSL on January 20, 2024 and sell it today you would lose (521.00) from holding CSL or give up 5.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.67%
Values	Daily Returns

WuXi Biologics  vs.  CSL

WuXi Biologics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WuXi Biologics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

CSL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with WuXi Biologics and CSL

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

The idea behind WuXi Biologics and CSL 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..