Correlation Between XiAn Dagang and China Sports

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

Diversification Opportunities for XiAn Dagang and China Sports

0.08

Correlation Coefficient

XiAn Dagang  China Sports

Significant diversification

The 3 months correlation between XiAn and China is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding XiAn Dagang Road and China Sports Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Sports Industry 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 China Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Sports Industry has no effect on the direction of XiAn Dagang i.e., XiAn Dagang and China Sports go up and down completely randomly.

Pair Corralation between XiAn Dagang and China Sports

Assuming the 90 days trading horizon XiAn Dagang Road is expected to under-perform the China Sports. In addition to that, XiAn Dagang is 1.01 times more volatile than China Sports Industry. It trades about -0.31 of its total potential returns per unit of risk. China Sports Industry is currently generating about -0.12 per unit of volatility. If you would invest  856.00  in China Sports Industry on October 8, 2024 and sell it today you would lose (80.00) from holding China Sports Industry or give up 9.35% of portfolio value over 90 days.

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

XiAn Dagang Road  vs.  China Sports Industry

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 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 Sports Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Sports Industry 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.

Pair Trading with XiAn Dagang and China Sports

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

The idea behind XiAn Dagang Road and China Sports Industry 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.