Correlation Between Xinjiang Communications and China Marine

Can any of the company-specific risk be diversified away by investing in both Xinjiang Communications and China Marine 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 Xinjiang Communications and China Marine into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xinjiang Communications Construction and China Marine Information, you can compare the effects of market volatilities on Xinjiang Communications and China Marine 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 Xinjiang Communications with a short position of China Marine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinjiang Communications and China Marine.

Diversification Opportunities for Xinjiang Communications and China Marine

0.39

Correlation Coefficient

Xinjiang Communications  China Marine

Weak diversification

The 3 months correlation between Xinjiang and China is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Xinjiang Communications Constr and China Marine Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Marine Information and Xinjiang Communications 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 Xinjiang Communications Construction are associated (or correlated) with China Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Marine Information has no effect on the direction of Xinjiang Communications i.e., Xinjiang Communications and China Marine go up and down completely randomly.

Pair Corralation between Xinjiang Communications and China Marine

Assuming the 90 days trading horizon Xinjiang Communications Construction is expected to under-perform the China Marine. But the stock apears to be less risky and, when comparing its historical volatility, Xinjiang Communications Construction is 1.43 times less risky than China Marine. The stock trades about -0.05 of its potential returns per unit of risk. The China Marine Information is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,798  in China Marine Information on December 25, 2024 and sell it today you would earn a total of  401.00  from holding China Marine Information or generate 14.33% return on investment over 90 days.

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

Xinjiang Communications Constr  vs.  China Marine Information

Xinjiang Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xinjiang Communications Construction 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.

China Marine Information

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Marine Information are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Marine sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xinjiang Communications and China Marine

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

The idea behind Xinjiang Communications Construction and China Marine Information 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.