Correlation Between China Vanke and Xiwang Foodstuffs

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

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

Diversification Opportunities for China Vanke and Xiwang Foodstuffs

-0.3

Correlation Coefficient

China Vanke  Xiwang Foodstuffs

Very good diversification

The 3 months correlation between China and Xiwang is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding China Vanke Co and Xiwang Foodstuffs Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiwang Foodstuffs and China Vanke 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 Vanke Co are associated (or correlated) with Xiwang Foodstuffs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiwang Foodstuffs has no effect on the direction of China Vanke i.e., China Vanke and Xiwang Foodstuffs go up and down completely randomly.

Pair Corralation between China Vanke and Xiwang Foodstuffs

Assuming the 90 days trading horizon China Vanke Co is expected to generate 0.98 times more return on investment than Xiwang Foodstuffs. However, China Vanke Co is 1.03 times less risky than Xiwang Foodstuffs. It trades about -0.01 of its potential returns per unit of risk. Xiwang Foodstuffs Co is currently generating about -0.15 per unit of risk. If you would invest  736.00  in China Vanke Co on December 30, 2024 and sell it today you would lose (24.00) from holding China Vanke Co or give up 3.26% of portfolio value over 90 days.

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

China Vanke Co  vs.  Xiwang Foodstuffs Co

China Vanke

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Vanke Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Vanke is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Xiwang Foodstuffs

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xiwang Foodstuffs Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with China Vanke and Xiwang Foodstuffs

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

The idea behind China Vanke Co and Xiwang Foodstuffs 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.