Correlation Between Xiandai Investment and FSPG Hi

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Can any of the company-specific risk be diversified away by investing in both Xiandai Investment and FSPG Hi 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 Xiandai Investment and FSPG Hi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xiandai Investment Co and FSPG Hi Tech Co, you can compare the effects of market volatilities on Xiandai Investment and FSPG Hi 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 Xiandai Investment with a short position of FSPG Hi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiandai Investment and FSPG Hi.

Diversification Opportunities for Xiandai Investment and FSPG Hi

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Xiandai and FSPG is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Xiandai Investment Co and FSPG Hi Tech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FSPG Hi Tech and Xiandai Investment 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 Xiandai Investment Co are associated (or correlated) with FSPG Hi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FSPG Hi Tech has no effect on the direction of Xiandai Investment i.e., Xiandai Investment and FSPG Hi go up and down completely randomly.

Pair Corralation between Xiandai Investment and FSPG Hi

Assuming the 90 days trading horizon Xiandai Investment is expected to generate 1.96 times less return on investment than FSPG Hi. But when comparing it to its historical volatility, Xiandai Investment Co is 1.83 times less risky than FSPG Hi. It trades about 0.03 of its potential returns per unit of risk. FSPG Hi Tech Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  481.00  in FSPG Hi Tech Co on October 6, 2024 and sell it today you would earn a total of  79.00  from holding FSPG Hi Tech Co or generate 16.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.58%
ValuesDaily Returns

Xiandai Investment Co  vs.  FSPG Hi Tech Co

 Performance 
       Timeline  
Xiandai Investment 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
FSPG Hi Tech 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in FSPG Hi Tech Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, FSPG Hi sustained solid returns over the last few months and may actually be approaching a breakup point.

Xiandai Investment and FSPG Hi Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Xiandai Investment and FSPG Hi

The main advantage of trading using opposite Xiandai Investment and FSPG Hi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xiandai Investment position performs unexpectedly, FSPG Hi 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 FSPG Hi will offset losses from the drop in FSPG Hi's long position.
The idea behind Xiandai Investment Co and FSPG Hi Tech 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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