Correlation Between Suofeiya Home and Xilinmen Furniture

Can any of the company-specific risk be diversified away by investing in both Suofeiya Home and Xilinmen Furniture 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 Suofeiya Home and Xilinmen Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Suofeiya Home Collection and Xilinmen Furniture Co, you can compare the effects of market volatilities on Suofeiya Home and Xilinmen Furniture 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 Suofeiya Home with a short position of Xilinmen Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suofeiya Home and Xilinmen Furniture.

Diversification Opportunities for Suofeiya Home and Xilinmen Furniture

0.99

Correlation Coefficient

Suofeiya Home  Xilinmen Furniture

No risk reduction

The 3 months correlation between Suofeiya and Xilinmen is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Suofeiya Home Collection and Xilinmen Furniture Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xilinmen Furniture and Suofeiya Home 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 Suofeiya Home Collection are associated (or correlated) with Xilinmen Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xilinmen Furniture has no effect on the direction of Suofeiya Home i.e., Suofeiya Home and Xilinmen Furniture go up and down completely randomly.

Pair Corralation between Suofeiya Home and Xilinmen Furniture

Assuming the 90 days trading horizon Suofeiya Home Collection is expected to generate 1.17 times more return on investment than Xilinmen Furniture. However, Suofeiya Home is 1.17 times more volatile than Xilinmen Furniture Co. It trades about 0.0 of its potential returns per unit of risk. Xilinmen Furniture Co is currently generating about 0.0 per unit of risk. If you would invest  1,814  in Suofeiya Home Collection on August 31, 2024 and sell it today you would lose (34.00) from holding Suofeiya Home Collection or give up 1.87% of portfolio value over 90 days.

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

Suofeiya Home Collection  vs.  Xilinmen Furniture Co

Suofeiya Home Collection

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Suofeiya Home Collection are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Suofeiya Home sustained solid returns over the last few months and may actually be approaching a breakup point.

Xilinmen Furniture

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xilinmen Furniture Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xilinmen Furniture sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Suofeiya Home and Xilinmen Furniture

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

The idea behind Suofeiya Home Collection and Xilinmen Furniture Co 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.