Correlation Between XiaMen HongXin and Sichuan Yahua

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

By analyzing existing cross correlation between XiaMen HongXin Electron tech and Sichuan Yahua Industrial, you can compare the effects of market volatilities on XiaMen HongXin and Sichuan Yahua 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 XiaMen HongXin with a short position of Sichuan Yahua. Check out your portfolio center. Please also check ongoing floating volatility patterns of XiaMen HongXin and Sichuan Yahua.

Diversification Opportunities for XiaMen HongXin and Sichuan Yahua

0.27

Correlation Coefficient

XiaMen HongXin  Sichuan Yahua

Modest diversification

The 3 months correlation between XiaMen and Sichuan is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding XiaMen HongXin Electron tech and Sichuan Yahua Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Yahua Industrial and XiaMen HongXin 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 XiaMen HongXin Electron tech are associated (or correlated) with Sichuan Yahua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Yahua Industrial has no effect on the direction of XiaMen HongXin i.e., XiaMen HongXin and Sichuan Yahua go up and down completely randomly.

Pair Corralation between XiaMen HongXin and Sichuan Yahua

Assuming the 90 days trading horizon XiaMen HongXin Electron tech is expected to generate 2.8 times more return on investment than Sichuan Yahua. However, XiaMen HongXin is 2.8 times more volatile than Sichuan Yahua Industrial. It trades about 0.13 of its potential returns per unit of risk. Sichuan Yahua Industrial is currently generating about 0.08 per unit of risk. If you would invest  2,377  in XiaMen HongXin Electron tech on December 26, 2024 and sell it today you would earn a total of  1,037  from holding XiaMen HongXin Electron tech or generate 43.63% return on investment over 90 days.

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

XiaMen HongXin Electron tech  vs.  Sichuan Yahua Industrial

XiaMen HongXin Electron

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in XiaMen HongXin Electron tech are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, XiaMen HongXin sustained solid returns over the last few months and may actually be approaching a breakup point.

Sichuan Yahua Industrial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Yahua Industrial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Yahua may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with XiaMen HongXin and Sichuan Yahua

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

The idea behind XiaMen HongXin Electron tech and Sichuan Yahua Industrial 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..