Correlation Between XiAn Dagang and Inner Mongolia

Can any of the company-specific risk be diversified away by investing in both XiAn Dagang and Inner Mongolia 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 Inner Mongolia 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 Inner Mongolia BaoTou, you can compare the effects of market volatilities on XiAn Dagang and Inner Mongolia 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 Inner Mongolia. Check out your portfolio center. Please also check ongoing floating volatility patterns of XiAn Dagang and Inner Mongolia.

Diversification Opportunities for XiAn Dagang and Inner Mongolia

-0.13

Correlation Coefficient

XiAn Dagang  Inner Mongolia

Good diversification

The 3 months correlation between XiAn and Inner is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding XiAn Dagang Road and Inner Mongolia BaoTou in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inner Mongolia BaoTou 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 Inner Mongolia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inner Mongolia BaoTou has no effect on the direction of XiAn Dagang i.e., XiAn Dagang and Inner Mongolia go up and down completely randomly.

Pair Corralation between XiAn Dagang and Inner Mongolia

Assuming the 90 days trading horizon XiAn Dagang Road is expected to under-perform the Inner Mongolia. In addition to that, XiAn Dagang is 1.82 times more volatile than Inner Mongolia BaoTou. It trades about -0.27 of its total potential returns per unit of risk. Inner Mongolia BaoTou is currently generating about -0.2 per unit of volatility. If you would invest  197.00  in Inner Mongolia BaoTou on October 4, 2024 and sell it today you would lose (16.00) from holding Inner Mongolia BaoTou or give up 8.12% of portfolio value over 90 days.

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

XiAn Dagang Road  vs.  Inner Mongolia BaoTou

XiAn Dagang Road

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XiAn Dagang Road has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Inner Mongolia BaoTou

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with XiAn Dagang and Inner Mongolia

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

The idea behind XiAn Dagang Road and Inner Mongolia BaoTou 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.