Correlation Between Xian International and Shenyang Chemical

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

By analyzing existing cross correlation between Xian International Medical and Shenyang Chemical Industry, you can compare the effects of market volatilities on Xian International and Shenyang Chemical 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 Xian International with a short position of Shenyang Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xian International and Shenyang Chemical.

Diversification Opportunities for Xian International and Shenyang Chemical

0.64

Correlation Coefficient

Xian International  Shenyang Chemical

Poor diversification

The 3 months correlation between Xian and Shenyang is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Xian International Medical and Shenyang Chemical Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenyang Chemical and Xian International 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 Xian International Medical are associated (or correlated) with Shenyang Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenyang Chemical has no effect on the direction of Xian International i.e., Xian International and Shenyang Chemical go up and down completely randomly.

Pair Corralation between Xian International and Shenyang Chemical

Assuming the 90 days trading horizon Xian International Medical is expected to generate 1.14 times more return on investment than Shenyang Chemical. However, Xian International is 1.14 times more volatile than Shenyang Chemical Industry. It trades about -0.02 of its potential returns per unit of risk. Shenyang Chemical Industry is currently generating about -0.08 per unit of risk. If you would invest  626.00  in Xian International Medical on December 1, 2024 and sell it today you would lose (35.00) from holding Xian International Medical or give up 5.59% of portfolio value over 90 days.

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

Xian International Medical  vs.  Shenyang Chemical Industry

Xian International

Risk-Adjusted Performance

Very Weak

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

Shenyang Chemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenyang Chemical Industry 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 Xian International and Shenyang Chemical

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

The idea behind Xian International Medical and Shenyang Chemical Industry 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.