Correlation Between Xiandai Investment and Xinjiang Baodi

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

Diversification Opportunities for Xiandai Investment and Xinjiang Baodi

0.95

Correlation Coefficient

Xiandai Investment  Xinjiang Baodi

Almost no diversification

The 3 months correlation between Xiandai and Xinjiang is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Xiandai Investment Co and Xinjiang Baodi Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinjiang Baodi Mining 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 Xinjiang Baodi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinjiang Baodi Mining has no effect on the direction of Xiandai Investment i.e., Xiandai Investment and Xinjiang Baodi go up and down completely randomly.

Pair Corralation between Xiandai Investment and Xinjiang Baodi

Assuming the 90 days trading horizon Xiandai Investment Co is expected to generate 1.13 times more return on investment than Xinjiang Baodi. However, Xiandai Investment is 1.13 times more volatile than Xinjiang Baodi Mining. It trades about -0.06 of its potential returns per unit of risk. Xinjiang Baodi Mining is currently generating about -0.12 per unit of risk. If you would invest  462.00  in Xiandai Investment Co on September 21, 2024 and sell it today you would lose (14.00) from holding Xiandai Investment Co or give up 3.03% 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.  Xinjiang Baodi Mining

Xiandai Investment

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xiandai Investment Co are ranked lower than 14 (%) 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.

Xinjiang Baodi Mining

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Baodi Mining are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinjiang Baodi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xiandai Investment and Xinjiang Baodi

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

The idea behind Xiandai Investment Co and Xinjiang Baodi Mining 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.