Correlation Between Xian International and Shaanxi Broadcast

Can any of the company-specific risk be diversified away by investing in both Xian International and Shaanxi Broadcast 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 Shaanxi Broadcast 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 Shaanxi Broadcast TV, you can compare the effects of market volatilities on Xian International and Shaanxi Broadcast 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 Shaanxi Broadcast. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xian International and Shaanxi Broadcast.

Diversification Opportunities for Xian International and Shaanxi Broadcast

0.79

Correlation Coefficient

Xian International  Shaanxi Broadcast

Poor diversification

The 3 months correlation between Xian and Shaanxi is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Xian International Medical and Shaanxi Broadcast TV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaanxi Broadcast 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 Shaanxi Broadcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaanxi Broadcast has no effect on the direction of Xian International i.e., Xian International and Shaanxi Broadcast go up and down completely randomly.

Pair Corralation between Xian International and Shaanxi Broadcast

Assuming the 90 days trading horizon Xian International Medical is expected to generate 2.34 times more return on investment than Shaanxi Broadcast. However, Xian International is 2.34 times more volatile than Shaanxi Broadcast TV. It trades about 0.27 of its potential returns per unit of risk. Shaanxi Broadcast TV is currently generating about 0.15 per unit of risk. If you would invest  501.00  in Xian International Medical on December 4, 2024 and sell it today you would earn a total of  118.00  from holding Xian International Medical or generate 23.55% return on investment over 90 days.

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

Xian International Medical  vs.  Shaanxi Broadcast TV

Xian International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xian International Medical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Shaanxi Broadcast

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Xian International and Shaanxi Broadcast

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

The idea behind Xian International Medical and Shaanxi Broadcast TV 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.