Correlation Between Xizi Clean and Liuzhou Chemical

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

By analyzing existing cross correlation between Xizi Clean Energy and Liuzhou Chemical Industry, you can compare the effects of market volatilities on Xizi Clean and Liuzhou Chemical 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 Xizi Clean with a short position of Liuzhou Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xizi Clean and Liuzhou Chemical.

Diversification Opportunities for Xizi Clean and Liuzhou Chemical

0.25

Correlation Coefficient

Xizi Clean  Liuzhou Chemical

Modest diversification

The 3 months correlation between Xizi and Liuzhou is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Xizi Clean Energy and Liuzhou Chemical Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liuzhou Chemical Industry and Xizi Clean 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 Xizi Clean Energy are associated (or correlated) with Liuzhou Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liuzhou Chemical Industry has no effect on the direction of Xizi Clean i.e., Xizi Clean and Liuzhou Chemical go up and down completely randomly.

Pair Corralation between Xizi Clean and Liuzhou Chemical

Assuming the 90 days trading horizon Xizi Clean Energy is expected to under-perform the Liuzhou Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Xizi Clean Energy is 1.36 times less risky than Liuzhou Chemical. The stock trades about -0.1 of its potential returns per unit of risk. The Liuzhou Chemical Industry is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  282.00  in Liuzhou Chemical Industry on October 8, 2024 and sell it today you would lose (5.00) from holding Liuzhou Chemical Industry or give up 1.77% of portfolio value over 90 days.

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

Xizi Clean Energy  vs.  Liuzhou Chemical Industry

Xizi Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xizi Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Liuzhou Chemical Industry

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Xizi Clean and Liuzhou Chemical

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

The idea behind Xizi Clean Energy and Liuzhou Chemical Industry 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.