Correlation Between XCMG Construction and Wintime Energy

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

Diversification Opportunities for XCMG Construction and Wintime Energy

0.31

Correlation Coefficient

XCMG Construction  Wintime Energy

Weak diversification

The 3 months correlation between XCMG and Wintime is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding XCMG Construction Machinery and Wintime Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wintime Energy 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 Wintime Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wintime Energy has no effect on the direction of XCMG Construction i.e., XCMG Construction and Wintime Energy go up and down completely randomly.

Pair Corralation between XCMG Construction and Wintime Energy

Assuming the 90 days trading horizon XCMG Construction Machinery is expected to generate 0.56 times more return on investment than Wintime Energy. However, XCMG Construction Machinery is 1.8 times less risky than Wintime Energy. It trades about -0.01 of its potential returns per unit of risk. Wintime Energy Co is currently generating about -0.04 per unit of risk. If you would invest  767.00  in XCMG Construction Machinery on October 19, 2024 and sell it today you would lose (9.00) from holding XCMG Construction Machinery or give up 1.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

XCMG Construction Machinery  vs.  Wintime Energy Co

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.

Wintime Energy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wintime Energy Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wintime Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XCMG Construction and Wintime Energy

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

The idea behind XCMG Construction Machinery and Wintime Energy 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.