Correlation Between Xinjiang Beixin and Dongguan Chitwing

Can any of the company-specific risk be diversified away by investing in both Xinjiang Beixin and Dongguan Chitwing 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 Dongguan Chitwing 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 Dongguan Chitwing Technology, you can compare the effects of market volatilities on Xinjiang Beixin and Dongguan Chitwing 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 Dongguan Chitwing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinjiang Beixin and Dongguan Chitwing.

Diversification Opportunities for Xinjiang Beixin and Dongguan Chitwing

0.88

Correlation Coefficient

Xinjiang Beixin  Dongguan Chitwing

Very poor diversification

The 3 months correlation between Xinjiang and Dongguan is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Xinjiang Beixin RoadBridge and Dongguan Chitwing Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongguan Chitwing 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 Dongguan Chitwing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongguan Chitwing has no effect on the direction of Xinjiang Beixin i.e., Xinjiang Beixin and Dongguan Chitwing go up and down completely randomly.

Pair Corralation between Xinjiang Beixin and Dongguan Chitwing

Assuming the 90 days trading horizon Xinjiang Beixin RoadBridge is expected to generate 0.79 times more return on investment than Dongguan Chitwing. However, Xinjiang Beixin RoadBridge is 1.26 times less risky than Dongguan Chitwing. It trades about 0.23 of its potential returns per unit of risk. Dongguan Chitwing Technology is currently generating about 0.14 per unit of risk. If you would invest  281.00  in Xinjiang Beixin RoadBridge on September 14, 2024 and sell it today you would earn a total of  152.00  from holding Xinjiang Beixin RoadBridge or generate 54.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.28%
Values	Daily Returns

Xinjiang Beixin RoadBridge  vs.  Dongguan Chitwing Technology

Xinjiang Beixin Road

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Beixin RoadBridge are ranked lower than 18 (%) 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.

Dongguan Chitwing

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Xinjiang Beixin and Dongguan Chitwing

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

The idea behind Xinjiang Beixin RoadBridge and Dongguan Chitwing Technology 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.