Correlation Between Zhongshan Broad and Xiandai Investment

Can any of the company-specific risk be diversified away by investing in both Zhongshan Broad and Xiandai Investment 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 Zhongshan Broad and Xiandai Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhongshan Broad Ocean Motor and Xiandai Investment Co, you can compare the effects of market volatilities on Zhongshan Broad and Xiandai Investment 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 Zhongshan Broad with a short position of Xiandai Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhongshan Broad and Xiandai Investment.

Diversification Opportunities for Zhongshan Broad and Xiandai Investment

0.56

Correlation Coefficient

Zhongshan Broad  Xiandai Investment

Very weak diversification

The 3 months correlation between Zhongshan and Xiandai is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Zhongshan Broad Ocean Motor and Xiandai Investment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiandai Investment and Zhongshan Broad 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 Zhongshan Broad Ocean Motor are associated (or correlated) with Xiandai Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiandai Investment has no effect on the direction of Zhongshan Broad i.e., Zhongshan Broad and Xiandai Investment go up and down completely randomly.

Pair Corralation between Zhongshan Broad and Xiandai Investment

Assuming the 90 days trading horizon Zhongshan Broad Ocean Motor is expected to under-perform the Xiandai Investment. But the stock apears to be less risky and, when comparing its historical volatility, Zhongshan Broad Ocean Motor is 1.06 times less risky than Xiandai Investment. The stock trades about -0.05 of its potential returns per unit of risk. The Xiandai Investment Co is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  440.00  in Xiandai Investment Co on October 7, 2024 and sell it today you would lose (21.00) from holding Xiandai Investment Co or give up 4.77% of portfolio value over 90 days.

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

Zhongshan Broad Ocean Motor  vs.  Xiandai Investment Co

Zhongshan Broad Ocean

Risk-Adjusted Performance

0 of 100

Very Weak

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

Xiandai Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xiandai Investment Co has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Zhongshan Broad and Xiandai Investment

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

The idea behind Zhongshan Broad Ocean Motor and Xiandai Investment 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.