Correlation Between Xiamen Insight and Xiandai Investment

Can any of the company-specific risk be diversified away by investing in both Xiamen Insight and Xiandai Investment 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 Xiamen Insight and Xiandai Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Xiamen Insight and Xiandai Investment

-0.24

Correlation Coefficient

Xiamen Insight  Xiandai Investment

Very good diversification

The 3 months correlation between Xiamen and Xiandai is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Xiamen Insight Investment and Xiandai Investment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiandai Investment and Xiamen Insight 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 Xiamen Insight Investment are associated (or correlated) with Xiandai Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiandai Investment has no effect on the direction of Xiamen Insight i.e., Xiamen Insight and Xiandai Investment go up and down completely randomly.

Pair Corralation between Xiamen Insight and Xiandai Investment

Assuming the 90 days trading horizon Xiamen Insight Investment is expected to generate 2.54 times more return on investment than Xiandai Investment. However, Xiamen Insight is 2.54 times more volatile than Xiandai Investment Co. It trades about 0.09 of its potential returns per unit of risk. Xiandai Investment Co is currently generating about -0.06 per unit of risk. If you would invest  4,349  in Xiamen Insight Investment on December 26, 2024 and sell it today you would earn a total of  575.00  from holding Xiamen Insight Investment or generate 13.22% return on investment over 90 days.

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

Xiamen Insight Investment  vs.  Xiandai Investment Co

Xiamen Insight Investment

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xiamen Insight Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiamen Insight sustained solid returns over the last few months and may actually be approaching a breakup point.

Xiandai Investment

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Xiamen Insight and Xiandai Investment

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

The idea behind Xiamen Insight Investment and Xiandai Investment 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.