Correlation Between XiAn Dagang and HanS Laser

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

By analyzing existing cross correlation between XiAn Dagang Road and HanS Laser Tech, you can compare the effects of market volatilities on XiAn Dagang and HanS Laser 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 XiAn Dagang with a short position of HanS Laser. Check out your portfolio center. Please also check ongoing floating volatility patterns of XiAn Dagang and HanS Laser.

Diversification Opportunities for XiAn Dagang and HanS Laser

0.53

Correlation Coefficient

XiAn Dagang  HanS Laser

Very weak diversification

The 3 months correlation between XiAn and HanS is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding XiAn Dagang Road and HanS Laser Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HanS Laser Tech and XiAn Dagang 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 XiAn Dagang Road are associated (or correlated) with HanS Laser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HanS Laser Tech has no effect on the direction of XiAn Dagang i.e., XiAn Dagang and HanS Laser go up and down completely randomly.

Pair Corralation between XiAn Dagang and HanS Laser

Assuming the 90 days trading horizon XiAn Dagang is expected to generate 2.67 times less return on investment than HanS Laser. In addition to that, XiAn Dagang is 1.79 times more volatile than HanS Laser Tech. It trades about 0.02 of its total potential returns per unit of risk. HanS Laser Tech is currently generating about 0.1 per unit of volatility. If you would invest  2,599  in HanS Laser Tech on December 24, 2024 and sell it today you would earn a total of  312.00  from holding HanS Laser Tech or generate 12.0% return on investment over 90 days.

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

XiAn Dagang Road  vs.  HanS Laser Tech

XiAn Dagang Road

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in XiAn Dagang Road are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, XiAn Dagang is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

HanS Laser Tech

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HanS Laser Tech are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HanS Laser sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XiAn Dagang and HanS Laser

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

The idea behind XiAn Dagang Road and HanS Laser Tech 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.