Correlation Between ChengDu Hi and Xingguang Agricultural

Can any of the company-specific risk be diversified away by investing in both ChengDu Hi and Xingguang Agricultural 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 ChengDu Hi and Xingguang Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ChengDu Hi Tech Development and Xingguang Agricultural Mach, you can compare the effects of market volatilities on ChengDu Hi and Xingguang Agricultural 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 ChengDu Hi with a short position of Xingguang Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of ChengDu Hi and Xingguang Agricultural.

Diversification Opportunities for ChengDu Hi and Xingguang Agricultural

0.41

Correlation Coefficient

ChengDu Hi  Xingguang Agricultural

Very weak diversification

The 3 months correlation between ChengDu and Xingguang is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding ChengDu Hi Tech Development and Xingguang Agricultural Mach in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xingguang Agricultural and ChengDu Hi 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 ChengDu Hi Tech Development are associated (or correlated) with Xingguang Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xingguang Agricultural has no effect on the direction of ChengDu Hi i.e., ChengDu Hi and Xingguang Agricultural go up and down completely randomly.

Pair Corralation between ChengDu Hi and Xingguang Agricultural

Assuming the 90 days trading horizon ChengDu Hi Tech Development is expected to generate 1.23 times more return on investment than Xingguang Agricultural. However, ChengDu Hi is 1.23 times more volatile than Xingguang Agricultural Mach. It trades about 0.09 of its potential returns per unit of risk. Xingguang Agricultural Mach is currently generating about 0.0 per unit of risk. If you would invest  1,369  in ChengDu Hi Tech Development on October 25, 2024 and sell it today you would earn a total of  4,348  from holding ChengDu Hi Tech Development or generate 317.6% return on investment over 90 days.

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

ChengDu Hi Tech Development  vs.  Xingguang Agricultural Mach

ChengDu Hi Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ChengDu Hi Tech Development 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Xingguang Agricultural

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ChengDu Hi and Xingguang Agricultural

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

The idea behind ChengDu Hi Tech Development and Xingguang Agricultural Mach 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.