Correlation Between Xiandai Investment and Shanghai Material

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

Diversification Opportunities for Xiandai Investment and Shanghai Material

0.74

Correlation Coefficient

Xiandai Investment  Shanghai Material

Poor diversification

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

Pair Corralation between Xiandai Investment and Shanghai Material

Assuming the 90 days trading horizon Xiandai Investment Co is expected to generate 0.5 times more return on investment than Shanghai Material. However, Xiandai Investment Co is 2.02 times less risky than Shanghai Material. It trades about -0.33 of its potential returns per unit of risk. Shanghai Material Trading is currently generating about -0.29 per unit of risk. If you would invest  471.00  in Xiandai Investment Co on October 12, 2024 and sell it today you would lose (54.00) from holding Xiandai Investment Co or give up 11.46% of portfolio value over 90 days.

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

Xiandai Investment Co  vs.  Shanghai Material Trading

Xiandai Investment

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xiandai Investment Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Shanghai Material Trading

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Material Trading are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Material may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Xiandai Investment and Shanghai Material

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

The idea behind Xiandai Investment Co and Shanghai Material Trading 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.