Correlation Between Xiandai Investment and Changchun BCHT

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

Diversification Opportunities for Xiandai Investment and Changchun BCHT

-0.19

Correlation Coefficient

Xiandai Investment  Changchun BCHT

Good diversification

The 3 months correlation between Xiandai and Changchun is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Xiandai Investment Co and Changchun BCHT Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changchun BCHT Biote 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 Changchun BCHT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changchun BCHT Biote has no effect on the direction of Xiandai Investment i.e., Xiandai Investment and Changchun BCHT go up and down completely randomly.

Pair Corralation between Xiandai Investment and Changchun BCHT

Assuming the 90 days trading horizon Xiandai Investment Co is expected to under-perform the Changchun BCHT. But the stock apears to be less risky and, when comparing its historical volatility, Xiandai Investment Co is 1.11 times less risky than Changchun BCHT. The stock trades about -0.31 of its potential returns per unit of risk. The Changchun BCHT Biotechnology is currently generating about -0.27 of returns per unit of risk over similar time horizon. If you would invest  2,745  in Changchun BCHT Biotechnology on October 9, 2024 and sell it today you would lose (285.00) from holding Changchun BCHT Biotechnology or give up 10.38% 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.  Changchun BCHT Biotechnology

Xiandai Investment

Risk-Adjusted Performance

1 of 100

Weak

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.

Changchun BCHT Biote

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Changchun BCHT Biotechnology 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 Changchun BCHT

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

The idea behind Xiandai Investment Co and Changchun BCHT Biotechnology 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.