Correlation Between Xilong Chemical and Sinomach Automobile

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

By analyzing existing cross correlation between Xilong Chemical Co and Sinomach Automobile Co, you can compare the effects of market volatilities on Xilong Chemical and Sinomach Automobile 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 Xilong Chemical with a short position of Sinomach Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xilong Chemical and Sinomach Automobile.

Diversification Opportunities for Xilong Chemical and Sinomach Automobile

0.73

Correlation Coefficient

Xilong Chemical  Sinomach Automobile

Poor diversification

The 3 months correlation between Xilong and Sinomach is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Xilong Chemical Co and Sinomach Automobile Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinomach Automobile and Xilong Chemical 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 Xilong Chemical Co are associated (or correlated) with Sinomach Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinomach Automobile has no effect on the direction of Xilong Chemical i.e., Xilong Chemical and Sinomach Automobile go up and down completely randomly.

Pair Corralation between Xilong Chemical and Sinomach Automobile

Assuming the 90 days trading horizon Xilong Chemical Co is expected to generate 1.38 times more return on investment than Sinomach Automobile. However, Xilong Chemical is 1.38 times more volatile than Sinomach Automobile Co. It trades about 0.04 of its potential returns per unit of risk. Sinomach Automobile Co is currently generating about -0.01 per unit of risk. If you would invest  578.00  in Xilong Chemical Co on October 6, 2024 and sell it today you would earn a total of  136.00  from holding Xilong Chemical Co or generate 23.53% return on investment over 90 days.

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

Xilong Chemical Co  vs.  Sinomach Automobile Co

Xilong Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xilong Chemical Co 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.

Sinomach Automobile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sinomach Automobile Co 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.

Pair Trading with Xilong Chemical and Sinomach Automobile

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

The idea behind Xilong Chemical Co and Sinomach Automobile 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.