Correlation Between ENERGYMACHINERY KOREA and Xavis

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

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

Diversification Opportunities for ENERGYMACHINERY KOREA and Xavis

0.6

Correlation Coefficient

ENERGYMACHINERY KOREA  Xavis

Poor diversification

The 3 months correlation between ENERGYMACHINERY and Xavis is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding ENERGYMACHINERY KOREA CoLtd and Xavis Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xavis and ENERGYMACHINERY KOREA 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 ENERGYMACHINERY KOREA CoLtd are associated (or correlated) with Xavis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xavis has no effect on the direction of ENERGYMACHINERY KOREA i.e., ENERGYMACHINERY KOREA and Xavis go up and down completely randomly.

Pair Corralation between ENERGYMACHINERY KOREA and Xavis

Assuming the 90 days trading horizon ENERGYMACHINERY KOREA CoLtd is expected to under-perform the Xavis. But the stock apears to be less risky and, when comparing its historical volatility, ENERGYMACHINERY KOREA CoLtd is 1.61 times less risky than Xavis. The stock trades about -0.01 of its potential returns per unit of risk. The Xavis Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  183,282  in Xavis Co on October 4, 2024 and sell it today you would lose (56,782) from holding Xavis Co or give up 30.98% of portfolio value over 90 days.

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

ENERGYMACHINERY KOREA CoLtd  vs.  Xavis Co

ENERGYMACHINERY KOREA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENERGYMACHINERY KOREA CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ENERGYMACHINERY KOREA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Xavis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xavis 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 ENERGYMACHINERY KOREA and Xavis

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

The idea behind ENERGYMACHINERY KOREA CoLtd and Xavis 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.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.