Correlation Between XiaMen HongXin and Dareway Software

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

Diversification Opportunities for XiaMen HongXin and Dareway Software

0.78

Correlation Coefficient

XiaMen HongXin  Dareway Software

Poor diversification

The 3 months correlation between XiaMen and Dareway is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding XiaMen HongXin Electron tech and Dareway Software Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dareway Software 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 Dareway Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dareway Software has no effect on the direction of XiaMen HongXin i.e., XiaMen HongXin and Dareway Software go up and down completely randomly.

Pair Corralation between XiaMen HongXin and Dareway Software

Assuming the 90 days trading horizon XiaMen HongXin Electron tech is expected to generate 2.18 times more return on investment than Dareway Software. However, XiaMen HongXin is 2.18 times more volatile than Dareway Software Co. It trades about 0.17 of its potential returns per unit of risk. Dareway Software Co is currently generating about 0.05 per unit of risk. If you would invest  2,228  in XiaMen HongXin Electron tech on December 25, 2024 and sell it today you would earn a total of  1,448  from holding XiaMen HongXin Electron tech or generate 64.99% return on investment over 90 days.

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

XiaMen HongXin Electron tech  vs.  Dareway Software Co

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 13 (%) 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.

Dareway Software

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dareway Software Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dareway Software may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with XiaMen HongXin and Dareway Software

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

The idea behind XiaMen HongXin Electron tech and Dareway Software Co 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.