Correlation Between Xiangyang Automobile and AVIC (Chengdu)

Can any of the company-specific risk be diversified away by investing in both Xiangyang Automobile and AVIC (Chengdu) 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 Xiangyang Automobile and AVIC (Chengdu) into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xiangyang Automobile Bearing and AVIC UAS Co, you can compare the effects of market volatilities on Xiangyang Automobile and AVIC (Chengdu) 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 Xiangyang Automobile with a short position of AVIC (Chengdu). Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiangyang Automobile and AVIC (Chengdu).

Diversification Opportunities for Xiangyang Automobile and AVIC (Chengdu)

0.67

Correlation Coefficient

Xiangyang Automobile  AVIC (Chengdu)

Poor diversification

The 3 months correlation between Xiangyang and AVIC is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Xiangyang Automobile Bearing and AVIC UAS Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVIC (Chengdu) and Xiangyang Automobile 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 Xiangyang Automobile Bearing are associated (or correlated) with AVIC (Chengdu). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVIC (Chengdu) has no effect on the direction of Xiangyang Automobile i.e., Xiangyang Automobile and AVIC (Chengdu) go up and down completely randomly.

Pair Corralation between Xiangyang Automobile and AVIC (Chengdu)

Assuming the 90 days trading horizon Xiangyang Automobile Bearing is expected to generate 2.12 times more return on investment than AVIC (Chengdu). However, Xiangyang Automobile is 2.12 times more volatile than AVIC UAS Co. It trades about 0.3 of its potential returns per unit of risk. AVIC UAS Co is currently generating about 0.05 per unit of risk. If you would invest  636.00  in Xiangyang Automobile Bearing on December 25, 2024 and sell it today you would earn a total of  895.00  from holding Xiangyang Automobile Bearing or generate 140.72% return on investment over 90 days.

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

Xiangyang Automobile Bearing  vs.  AVIC UAS Co

Xiangyang Automobile

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xiangyang Automobile Bearing are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiangyang Automobile sustained solid returns over the last few months and may actually be approaching a breakup point.

AVIC (Chengdu)

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AVIC UAS Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AVIC (Chengdu) may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Xiangyang Automobile and AVIC (Chengdu)

The main advantage of trading using opposite Xiangyang Automobile and AVIC (Chengdu) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xiangyang Automobile position performs unexpectedly, AVIC (Chengdu) 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 AVIC (Chengdu) will offset losses from the drop in AVIC (Chengdu)'s long position.

The idea behind Xiangyang Automobile Bearing and AVIC UAS 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.