Correlation Between Xiandai Investment and Cangzhou Mingzhu

Can any of the company-specific risk be diversified away by investing in both Xiandai Investment and Cangzhou Mingzhu 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 Cangzhou Mingzhu 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 Cangzhou Mingzhu Plastic, you can compare the effects of market volatilities on Xiandai Investment and Cangzhou Mingzhu 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 Cangzhou Mingzhu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiandai Investment and Cangzhou Mingzhu.

Diversification Opportunities for Xiandai Investment and Cangzhou Mingzhu

0.91

Correlation Coefficient

Xiandai Investment  Cangzhou Mingzhu

Almost no diversification

The 3 months correlation between Xiandai and Cangzhou is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Xiandai Investment Co and Cangzhou Mingzhu Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cangzhou Mingzhu Plastic 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 Cangzhou Mingzhu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cangzhou Mingzhu Plastic has no effect on the direction of Xiandai Investment i.e., Xiandai Investment and Cangzhou Mingzhu go up and down completely randomly.

Pair Corralation between Xiandai Investment and Cangzhou Mingzhu

Assuming the 90 days trading horizon Xiandai Investment Co is expected to under-perform the Cangzhou Mingzhu. But the stock apears to be less risky and, when comparing its historical volatility, Xiandai Investment Co is 1.26 times less risky than Cangzhou Mingzhu. The stock trades about -0.06 of its potential returns per unit of risk. The Cangzhou Mingzhu Plastic is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  359.00  in Cangzhou Mingzhu Plastic on December 26, 2024 and sell it today you would lose (1.00) from holding Cangzhou Mingzhu Plastic or give up 0.28% of portfolio value over 90 days.

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

Xiandai Investment Co  vs.  Cangzhou Mingzhu Plastic

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.

Cangzhou Mingzhu Plastic

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Xiandai Investment and Cangzhou Mingzhu

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

The idea behind Xiandai Investment Co and Cangzhou Mingzhu Plastic 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.