Correlation Between Xinxiang Chemical and Chongqing Shunbo

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Can any of the company-specific risk be diversified away by investing in both Xinxiang Chemical and Chongqing Shunbo 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 Chongqing Shunbo 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 Chongqing Shunbo Aluminum, you can compare the effects of market volatilities on Xinxiang Chemical and Chongqing Shunbo 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 Chongqing Shunbo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinxiang Chemical and Chongqing Shunbo.

Diversification Opportunities for Xinxiang Chemical and Chongqing Shunbo

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Xinxiang and Chongqing is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Xinxiang Chemical Fiber and Chongqing Shunbo Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Shunbo Aluminum 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 Chongqing Shunbo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Shunbo Aluminum has no effect on the direction of Xinxiang Chemical i.e., Xinxiang Chemical and Chongqing Shunbo go up and down completely randomly.

Pair Corralation between Xinxiang Chemical and Chongqing Shunbo

Assuming the 90 days trading horizon Xinxiang Chemical Fiber is expected to generate 2.02 times more return on investment than Chongqing Shunbo. However, Xinxiang Chemical is 2.02 times more volatile than Chongqing Shunbo Aluminum. It trades about 0.0 of its potential returns per unit of risk. Chongqing Shunbo Aluminum is currently generating about -0.02 per unit of risk. If you would invest  434.00  in Xinxiang Chemical Fiber on September 25, 2024 and sell it today you would lose (8.00) from holding Xinxiang Chemical Fiber or give up 1.84% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Xinxiang Chemical Fiber  vs.  Chongqing Shunbo Aluminum

 Performance 
       Timeline  
Xinxiang Chemical Fiber 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Xinxiang Chemical Fiber are ranked lower than 10 (%) 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.
Chongqing Shunbo Aluminum 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Shunbo Aluminum are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chongqing Shunbo sustained solid returns over the last few months and may actually be approaching a breakup point.

Xinxiang Chemical and Chongqing Shunbo Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Xinxiang Chemical and Chongqing Shunbo

The main advantage of trading using opposite Xinxiang Chemical and Chongqing Shunbo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xinxiang Chemical position performs unexpectedly, Chongqing Shunbo 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 Chongqing Shunbo will offset losses from the drop in Chongqing Shunbo's long position.
The idea behind Xinxiang Chemical Fiber and Chongqing Shunbo Aluminum 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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