Correlation Between XiaMen HongXin and Gemdale Corp

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

Diversification Opportunities for XiaMen HongXin and Gemdale Corp

0.47

Correlation Coefficient

XiaMen HongXin  Gemdale Corp

Very weak diversification

The 3 months correlation between XiaMen and Gemdale is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding XiaMen HongXin Electron tech and Gemdale Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gemdale Corp 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 Gemdale Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gemdale Corp has no effect on the direction of XiaMen HongXin i.e., XiaMen HongXin and Gemdale Corp go up and down completely randomly.

Pair Corralation between XiaMen HongXin and Gemdale Corp

Assuming the 90 days trading horizon XiaMen HongXin Electron tech is expected to generate 2.71 times more return on investment than Gemdale Corp. However, XiaMen HongXin is 2.71 times more volatile than Gemdale Corp. It trades about 0.13 of its potential returns per unit of risk. Gemdale Corp is currently generating about 0.01 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	Weak
Accuracy	98.28%
Values	Daily Returns

XiaMen HongXin Electron tech  vs.  Gemdale Corp

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.

Gemdale Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gemdale Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Gemdale Corp 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 Gemdale Corp

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

The idea behind XiaMen HongXin Electron tech and Gemdale Corp 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.