Correlation Between Songz Automobile and Xinjiang Tianrun

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

By analyzing existing cross correlation between Songz Automobile Air and Xinjiang Tianrun Dairy, you can compare the effects of market volatilities on Songz Automobile and Xinjiang Tianrun 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 Songz Automobile with a short position of Xinjiang Tianrun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Songz Automobile and Xinjiang Tianrun.

Diversification Opportunities for Songz Automobile and Xinjiang Tianrun

0.96

Correlation Coefficient

Songz Automobile  Xinjiang Tianrun

Almost no diversification

The 3 months correlation between Songz and Xinjiang is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Songz Automobile Air and Xinjiang Tianrun Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinjiang Tianrun Dairy and Songz Automobile 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 Songz Automobile Air are associated (or correlated) with Xinjiang Tianrun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinjiang Tianrun Dairy has no effect on the direction of Songz Automobile i.e., Songz Automobile and Xinjiang Tianrun go up and down completely randomly.

Pair Corralation between Songz Automobile and Xinjiang Tianrun

Assuming the 90 days trading horizon Songz Automobile is expected to generate 2.67 times less return on investment than Xinjiang Tianrun. But when comparing it to its historical volatility, Songz Automobile Air is 1.46 times less risky than Xinjiang Tianrun. It trades about 0.13 of its potential returns per unit of risk. Xinjiang Tianrun Dairy is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  922.00  in Xinjiang Tianrun Dairy on September 18, 2024 and sell it today you would earn a total of  127.00  from holding Xinjiang Tianrun Dairy or generate 13.77% return on investment over 90 days.

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

Songz Automobile Air  vs.  Xinjiang Tianrun Dairy

Songz Automobile Air

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Songz Automobile Air are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Songz Automobile sustained solid returns over the last few months and may actually be approaching a breakup point.

Xinjiang Tianrun Dairy

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Tianrun Dairy are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinjiang Tianrun sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Songz Automobile and Xinjiang Tianrun

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

The idea behind Songz Automobile Air and Xinjiang Tianrun Dairy 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.

Check out your portfolio center.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.