Correlation Between Weichai Heavy and Xiangyu Medical

Can any of the company-specific risk be diversified away by investing in both Weichai Heavy and Xiangyu Medical 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 Weichai Heavy and Xiangyu Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Weichai Heavy Machinery and Xiangyu Medical Co, you can compare the effects of market volatilities on Weichai Heavy and Xiangyu Medical 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 Weichai Heavy with a short position of Xiangyu Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weichai Heavy and Xiangyu Medical.

Diversification Opportunities for Weichai Heavy and Xiangyu Medical

0.22

Correlation Coefficient

Weichai Heavy  Xiangyu Medical

Modest diversification

The 3 months correlation between Weichai and Xiangyu is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Weichai Heavy Machinery and Xiangyu Medical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiangyu Medical and Weichai Heavy 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 Weichai Heavy Machinery are associated (or correlated) with Xiangyu Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiangyu Medical has no effect on the direction of Weichai Heavy i.e., Weichai Heavy and Xiangyu Medical go up and down completely randomly.

Pair Corralation between Weichai Heavy and Xiangyu Medical

Assuming the 90 days trading horizon Weichai Heavy Machinery is expected to generate 1.24 times more return on investment than Xiangyu Medical. However, Weichai Heavy is 1.24 times more volatile than Xiangyu Medical Co. It trades about 0.22 of its potential returns per unit of risk. Xiangyu Medical Co is currently generating about 0.02 per unit of risk. If you would invest  1,018  in Weichai Heavy Machinery on October 10, 2024 and sell it today you would earn a total of  784.00  from holding Weichai Heavy Machinery or generate 77.01% return on investment over 90 days.

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

Weichai Heavy Machinery  vs.  Xiangyu Medical Co

Weichai Heavy Machinery

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Weichai Heavy Machinery are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Weichai Heavy sustained solid returns over the last few months and may actually be approaching a breakup point.

Xiangyu Medical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xiangyu Medical Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Xiangyu Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Weichai Heavy and Xiangyu Medical

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

The idea behind Weichai Heavy Machinery and Xiangyu Medical 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.