Correlation Between Xinxiang Chemical and Xiangtan Electrochemical

Can any of the company-specific risk be diversified away by investing in both Xinxiang Chemical and Xiangtan Electrochemical 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 Xinxiang Chemical and Xiangtan Electrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xinxiang Chemical Fiber and Xiangtan Electrochemical Scientific, you can compare the effects of market volatilities on Xinxiang Chemical and Xiangtan Electrochemical 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 Xinxiang Chemical with a short position of Xiangtan Electrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinxiang Chemical and Xiangtan Electrochemical.

Diversification Opportunities for Xinxiang Chemical and Xiangtan Electrochemical

0.43

Correlation Coefficient

Xinxiang Chemical  Xiangtan Electrochemical

Very weak diversification

The 3 months correlation between Xinxiang and Xiangtan is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Xinxiang Chemical Fiber and Xiangtan Electrochemical Scien in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiangtan Electrochemical and Xinxiang Chemical 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 Xinxiang Chemical Fiber are associated (or correlated) with Xiangtan Electrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiangtan Electrochemical has no effect on the direction of Xinxiang Chemical i.e., Xinxiang Chemical and Xiangtan Electrochemical go up and down completely randomly.

Pair Corralation between Xinxiang Chemical and Xiangtan Electrochemical

Assuming the 90 days trading horizon Xinxiang Chemical Fiber is expected to generate 1.17 times more return on investment than Xiangtan Electrochemical. However, Xinxiang Chemical is 1.17 times more volatile than Xiangtan Electrochemical Scientific. It trades about 0.0 of its potential returns per unit of risk. Xiangtan Electrochemical Scientific is currently generating about 0.0 per unit of risk. If you would invest  417.00  in Xinxiang Chemical Fiber on October 26, 2024 and sell it today you would lose (2.00) from holding Xinxiang Chemical Fiber or give up 0.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Xinxiang Chemical Fiber  vs.  Xiangtan Electrochemical Scien

Xinxiang Chemical Fiber

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xinxiang Chemical Fiber are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinxiang Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Xiangtan Electrochemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xiangtan Electrochemical Scientific has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Xiangtan Electrochemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Xinxiang Chemical and Xiangtan Electrochemical

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

The idea behind Xinxiang Chemical Fiber and Xiangtan Electrochemical Scientific 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.