Correlation Between Xizi Clean and Beijing Baolande

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

Diversification Opportunities for Xizi Clean and Beijing Baolande

0.51

Correlation Coefficient

Xizi Clean  Beijing Baolande

Very weak diversification

The 3 months correlation between Xizi and Beijing is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Xizi Clean Energy and Beijing Baolande Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Baolande Software 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 Beijing Baolande. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Baolande Software has no effect on the direction of Xizi Clean i.e., Xizi Clean and Beijing Baolande go up and down completely randomly.

Pair Corralation between Xizi Clean and Beijing Baolande

Assuming the 90 days trading horizon Xizi Clean is expected to generate 1.54 times less return on investment than Beijing Baolande. But when comparing it to its historical volatility, Xizi Clean Energy is 1.87 times less risky than Beijing Baolande. It trades about 0.14 of its potential returns per unit of risk. Beijing Baolande Software is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,788  in Beijing Baolande Software on October 24, 2024 and sell it today you would earn a total of  861.00  from holding Beijing Baolande Software or generate 48.15% return on investment over 90 days.

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

Xizi Clean Energy  vs.  Beijing Baolande Software

Xizi Clean Energy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xizi Clean Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xizi Clean may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Beijing Baolande Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beijing Baolande Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Xizi Clean and Beijing Baolande

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

The idea behind Xizi Clean Energy and Beijing Baolande Software 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.