Correlation Between Shanxi Tond and Xinjiang Baodi

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

By analyzing existing cross correlation between Shanxi Tond Chemical and Xinjiang Baodi Mining, you can compare the effects of market volatilities on Shanxi Tond and Xinjiang Baodi 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 Shanxi Tond with a short position of Xinjiang Baodi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanxi Tond and Xinjiang Baodi.

Diversification Opportunities for Shanxi Tond and Xinjiang Baodi

0.41

Correlation Coefficient

Shanxi Tond  Xinjiang Baodi

Very weak diversification

The 3 months correlation between Shanxi and Xinjiang is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Shanxi Tond Chemical and Xinjiang Baodi Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinjiang Baodi Mining and Shanxi Tond 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 Shanxi Tond Chemical are associated (or correlated) with Xinjiang Baodi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinjiang Baodi Mining has no effect on the direction of Shanxi Tond i.e., Shanxi Tond and Xinjiang Baodi go up and down completely randomly.

Pair Corralation between Shanxi Tond and Xinjiang Baodi

Assuming the 90 days trading horizon Shanxi Tond is expected to generate 1.16 times less return on investment than Xinjiang Baodi. But when comparing it to its historical volatility, Shanxi Tond Chemical is 1.03 times less risky than Xinjiang Baodi. It trades about 0.04 of its potential returns per unit of risk. Xinjiang Baodi Mining is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  597.00  in Xinjiang Baodi Mining on October 22, 2024 and sell it today you would earn a total of  28.00  from holding Xinjiang Baodi Mining or generate 4.69% return on investment over 90 days.

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

Shanxi Tond Chemical  vs.  Xinjiang Baodi Mining

Shanxi Tond Chemical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shanxi Tond Chemical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shanxi Tond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Xinjiang Baodi Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Baodi Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinjiang Baodi may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Shanxi Tond and Xinjiang Baodi

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

The idea behind Shanxi Tond Chemical and Xinjiang Baodi Mining 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.