Correlation Between Xinjiang Beixin and Shandong

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

By analyzing existing cross correlation between Xinjiang Beixin RoadBridge and Shandong Hi Speed RoadBridge, you can compare the effects of market volatilities on Xinjiang Beixin and Shandong 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 Xinjiang Beixin with a short position of Shandong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinjiang Beixin and Shandong.

Diversification Opportunities for Xinjiang Beixin and Shandong

0.93

Correlation Coefficient

Xinjiang Beixin  Shandong

Almost no diversification

The 3 months correlation between Xinjiang and Shandong is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Xinjiang Beixin RoadBridge and Shandong Hi Speed RoadBridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Hi Speed and Xinjiang Beixin 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 Xinjiang Beixin RoadBridge are associated (or correlated) with Shandong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Hi Speed has no effect on the direction of Xinjiang Beixin i.e., Xinjiang Beixin and Shandong go up and down completely randomly.

Pair Corralation between Xinjiang Beixin and Shandong

Assuming the 90 days trading horizon Xinjiang Beixin RoadBridge is expected to generate 1.28 times more return on investment than Shandong. However, Xinjiang Beixin is 1.28 times more volatile than Shandong Hi Speed RoadBridge. It trades about 0.16 of its potential returns per unit of risk. Shandong Hi Speed RoadBridge is currently generating about 0.16 per unit of risk. If you would invest  307.00  in Xinjiang Beixin RoadBridge on September 2, 2024 and sell it today you would earn a total of  108.00  from holding Xinjiang Beixin RoadBridge or generate 35.18% return on investment over 90 days.

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

Xinjiang Beixin RoadBridge  vs.  Shandong Hi Speed RoadBridge

Xinjiang Beixin Road

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Beixin RoadBridge are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinjiang Beixin sustained solid returns over the last few months and may actually be approaching a breakup point.

Shandong Hi Speed

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Hi Speed RoadBridge are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xinjiang Beixin and Shandong

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

The idea behind Xinjiang Beixin RoadBridge and Shandong Hi Speed RoadBridge 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.