Correlation Between Xiandai Investment and Westone Information

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

Diversification Opportunities for Xiandai Investment and Westone Information

0.74

Correlation Coefficient

Xiandai Investment  Westone Information

Poor diversification

The 3 months correlation between Xiandai and Westone is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Xiandai Investment Co and Westone Information Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westone Information 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 Westone Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westone Information has no effect on the direction of Xiandai Investment i.e., Xiandai Investment and Westone Information go up and down completely randomly.

Pair Corralation between Xiandai Investment and Westone Information

Assuming the 90 days trading horizon Xiandai Investment Co is expected to generate 0.54 times more return on investment than Westone Information. However, Xiandai Investment Co is 1.86 times less risky than Westone Information. It trades about 0.03 of its potential returns per unit of risk. Westone Information Industry is currently generating about -0.03 per unit of risk. If you would invest  392.00  in Xiandai Investment Co on September 20, 2024 and sell it today you would earn a total of  60.00  from holding Xiandai Investment Co or generate 15.31% return on investment over 90 days.

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

Xiandai Investment Co  vs.  Westone Information Industry

Xiandai Investment

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xiandai Investment Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiandai Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Westone Information

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Westone Information Industry are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Westone Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xiandai Investment and Westone Information

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

The idea behind Xiandai Investment Co and Westone Information Industry 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.

Check out your portfolio center.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.