Correlation Between Xizi Clean and Shaanxi Broadcast

Can any of the company-specific risk be diversified away by investing in both Xizi Clean and Shaanxi Broadcast 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 Shaanxi Broadcast 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 Shaanxi Broadcast TV, you can compare the effects of market volatilities on Xizi Clean and Shaanxi Broadcast 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 Shaanxi Broadcast. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xizi Clean and Shaanxi Broadcast.

Diversification Opportunities for Xizi Clean and Shaanxi Broadcast

0.23

Correlation Coefficient

Xizi Clean  Shaanxi Broadcast

Modest diversification

The 3 months correlation between Xizi and Shaanxi is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Xizi Clean Energy and Shaanxi Broadcast TV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaanxi Broadcast 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 Shaanxi Broadcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaanxi Broadcast has no effect on the direction of Xizi Clean i.e., Xizi Clean and Shaanxi Broadcast go up and down completely randomly.

Pair Corralation between Xizi Clean and Shaanxi Broadcast

Assuming the 90 days trading horizon Xizi Clean Energy is expected to generate 0.86 times more return on investment than Shaanxi Broadcast. However, Xizi Clean Energy is 1.17 times less risky than Shaanxi Broadcast. It trades about 0.05 of its potential returns per unit of risk. Shaanxi Broadcast TV is currently generating about -0.01 per unit of risk. If you would invest  944.00  in Xizi Clean Energy on October 7, 2024 and sell it today you would earn a total of  106.00  from holding Xizi Clean Energy or generate 11.23% return on investment over 90 days.

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

Xizi Clean Energy  vs.  Shaanxi Broadcast TV

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.

Shaanxi Broadcast

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shaanxi Broadcast TV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shaanxi Broadcast 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 Shaanxi Broadcast

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

The idea behind Xizi Clean Energy and Shaanxi Broadcast TV 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.