Correlation Between Advanced Technology and Xilinmen Furniture

Can any of the company-specific risk be diversified away by investing in both Advanced Technology and Xilinmen Furniture 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 Advanced Technology and Xilinmen Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Advanced Technology Materials and Xilinmen Furniture Co, you can compare the effects of market volatilities on Advanced Technology and Xilinmen Furniture 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 Advanced Technology with a short position of Xilinmen Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Technology and Xilinmen Furniture.

Diversification Opportunities for Advanced Technology and Xilinmen Furniture

0.36

Correlation Coefficient

Advanced Technology  Xilinmen Furniture

Weak diversification

The 3 months correlation between Advanced and Xilinmen is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Technology Materials and Xilinmen Furniture Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xilinmen Furniture and Advanced Technology 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 Advanced Technology Materials are associated (or correlated) with Xilinmen Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xilinmen Furniture has no effect on the direction of Advanced Technology i.e., Advanced Technology and Xilinmen Furniture go up and down completely randomly.

Pair Corralation between Advanced Technology and Xilinmen Furniture

Assuming the 90 days trading horizon Advanced Technology Materials is expected to generate 1.71 times more return on investment than Xilinmen Furniture. However, Advanced Technology is 1.71 times more volatile than Xilinmen Furniture Co. It trades about 0.17 of its potential returns per unit of risk. Xilinmen Furniture Co is currently generating about 0.15 per unit of risk. If you would invest  1,175  in Advanced Technology Materials on December 4, 2024 and sell it today you would earn a total of  107.00  from holding Advanced Technology Materials or generate 9.11% return on investment over 90 days.

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

Advanced Technology Materials  vs.  Xilinmen Furniture Co

Advanced Technology

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Technology Materials are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Advanced Technology may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Xilinmen Furniture

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xilinmen Furniture Co 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 Advanced Technology and Xilinmen Furniture

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

The idea behind Advanced Technology Materials and Xilinmen Furniture Co 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.