Correlation Between XiaMen HongXin and Guizhou Chanhen

Can any of the company-specific risk be diversified away by investing in both XiaMen HongXin and Guizhou Chanhen 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 Guizhou Chanhen 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 Guizhou Chanhen Chemical, you can compare the effects of market volatilities on XiaMen HongXin and Guizhou Chanhen 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 Guizhou Chanhen. Check out your portfolio center. Please also check ongoing floating volatility patterns of XiaMen HongXin and Guizhou Chanhen.

Diversification Opportunities for XiaMen HongXin and Guizhou Chanhen

-0.03

Correlation Coefficient

XiaMen HongXin  Guizhou Chanhen

Good diversification

The 3 months correlation between XiaMen and Guizhou is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding XiaMen HongXin Electron tech and Guizhou Chanhen Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guizhou Chanhen Chemical 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 Guizhou Chanhen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guizhou Chanhen Chemical has no effect on the direction of XiaMen HongXin i.e., XiaMen HongXin and Guizhou Chanhen go up and down completely randomly.

Pair Corralation between XiaMen HongXin and Guizhou Chanhen

Assuming the 90 days trading horizon XiaMen HongXin Electron tech is expected to generate 3.68 times more return on investment than Guizhou Chanhen. However, XiaMen HongXin is 3.68 times more volatile than Guizhou Chanhen Chemical. It trades about 0.13 of its potential returns per unit of risk. Guizhou Chanhen Chemical is currently generating about -0.03 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

XiaMen HongXin Electron tech  vs.  Guizhou Chanhen Chemical

XiaMen HongXin Electron

Risk-Adjusted Performance

Good

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.

Guizhou Chanhen Chemical

Risk-Adjusted Performance

Very Weak

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

Pair Trading with XiaMen HongXin and Guizhou Chanhen

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

The idea behind XiaMen HongXin Electron tech and Guizhou Chanhen Chemical 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.