Correlation Between XCMG Construction and New Hope

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

By analyzing existing cross correlation between XCMG Construction Machinery and New Hope Dairy, you can compare the effects of market volatilities on XCMG Construction and New Hope 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 XCMG Construction with a short position of New Hope. Check out your portfolio center. Please also check ongoing floating volatility patterns of XCMG Construction and New Hope.

Diversification Opportunities for XCMG Construction and New Hope

0.11

Correlation Coefficient

XCMG Construction  New Hope

Average diversification

The 3 months correlation between XCMG and New is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding XCMG Construction Machinery and New Hope Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Hope Dairy and XCMG Construction 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 XCMG Construction Machinery are associated (or correlated) with New Hope. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Hope Dairy has no effect on the direction of XCMG Construction i.e., XCMG Construction and New Hope go up and down completely randomly.

Pair Corralation between XCMG Construction and New Hope

Assuming the 90 days trading horizon XCMG Construction Machinery is expected to under-perform the New Hope. But the stock apears to be less risky and, when comparing its historical volatility, XCMG Construction Machinery is 1.53 times less risky than New Hope. The stock trades about -0.19 of its potential returns per unit of risk. The New Hope Dairy is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,448  in New Hope Dairy on October 11, 2024 and sell it today you would earn a total of  143.00  from holding New Hope Dairy or generate 9.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

XCMG Construction Machinery  vs.  New Hope Dairy

XCMG Construction

Risk-Adjusted Performance

0 of 100

Very Weak

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

New Hope Dairy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in New Hope Dairy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, New Hope sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XCMG Construction and New Hope

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

The idea behind XCMG Construction Machinery and New Hope Dairy 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.