Correlation Between Xiandai Investment and Zhejiang Publishing

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

Diversification Opportunities for Xiandai Investment and Zhejiang Publishing

-0.04

Correlation Coefficient

Xiandai Investment  Zhejiang Publishing

Good diversification

The 3 months correlation between Xiandai and Zhejiang is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Xiandai Investment Co and Zhejiang Publishing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Publishing Media 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 Zhejiang Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Publishing Media has no effect on the direction of Xiandai Investment i.e., Xiandai Investment and Zhejiang Publishing go up and down completely randomly.

Pair Corralation between Xiandai Investment and Zhejiang Publishing

Assuming the 90 days trading horizon Xiandai Investment Co is expected to under-perform the Zhejiang Publishing. But the stock apears to be less risky and, when comparing its historical volatility, Xiandai Investment Co is 1.13 times less risky than Zhejiang Publishing. The stock trades about -0.19 of its potential returns per unit of risk. The Zhejiang Publishing Media is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  789.00  in Zhejiang Publishing Media on October 6, 2024 and sell it today you would lose (27.00) from holding Zhejiang Publishing Media or give up 3.42% of portfolio value over 90 days.

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

Xiandai Investment Co  vs.  Zhejiang Publishing Media

Xiandai Investment

Risk-Adjusted Performance

0 of 100

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.

Zhejiang Publishing Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Publishing Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Xiandai Investment and Zhejiang Publishing

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

The idea behind Xiandai Investment Co and Zhejiang Publishing Media 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.