Correlation Between Xinxiang Chemical and Beijing Jiaman

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

Diversification Opportunities for Xinxiang Chemical and Beijing Jiaman

0.3

Correlation Coefficient

Xinxiang Chemical  Beijing Jiaman

Weak diversification

The 3 months correlation between Xinxiang and Beijing is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Xinxiang Chemical Fiber and Beijing Jiaman Dress in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Jiaman Dress 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 Beijing Jiaman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Jiaman Dress has no effect on the direction of Xinxiang Chemical i.e., Xinxiang Chemical and Beijing Jiaman go up and down completely randomly.

Pair Corralation between Xinxiang Chemical and Beijing Jiaman

Assuming the 90 days trading horizon Xinxiang Chemical Fiber is expected to generate 1.83 times more return on investment than Beijing Jiaman. However, Xinxiang Chemical is 1.83 times more volatile than Beijing Jiaman Dress. It trades about 0.06 of its potential returns per unit of risk. Beijing Jiaman Dress is currently generating about -0.05 per unit of risk. If you would invest  349.00  in Xinxiang Chemical Fiber on October 11, 2024 and sell it today you would earn a total of  36.00  from holding Xinxiang Chemical Fiber or generate 10.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Xinxiang Chemical Fiber  vs.  Beijing Jiaman Dress

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.

Beijing Jiaman Dress

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beijing Jiaman Dress has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Xinxiang Chemical and Beijing Jiaman

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

The idea behind Xinxiang Chemical Fiber and Beijing Jiaman Dress 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.