Correlation Between Yingde Greatchem and Xinjiang Beixin

Can any of the company-specific risk be diversified away by investing in both Yingde Greatchem and Xinjiang Beixin 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 Yingde Greatchem and Xinjiang Beixin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yingde Greatchem Chemicals and Xinjiang Beixin RoadBridge, you can compare the effects of market volatilities on Yingde Greatchem and Xinjiang Beixin 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 Yingde Greatchem with a short position of Xinjiang Beixin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yingde Greatchem and Xinjiang Beixin.

Diversification Opportunities for Yingde Greatchem and Xinjiang Beixin

0.54

Correlation Coefficient

Yingde Greatchem  Xinjiang Beixin

Very weak diversification

The 3 months correlation between Yingde and Xinjiang is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Yingde Greatchem Chemicals and Xinjiang Beixin RoadBridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinjiang Beixin Road and Yingde Greatchem 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 Yingde Greatchem Chemicals are associated (or correlated) with Xinjiang Beixin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinjiang Beixin Road has no effect on the direction of Yingde Greatchem i.e., Yingde Greatchem and Xinjiang Beixin go up and down completely randomly.

Pair Corralation between Yingde Greatchem and Xinjiang Beixin

Assuming the 90 days trading horizon Yingde Greatchem Chemicals is expected to generate 0.65 times more return on investment than Xinjiang Beixin. However, Yingde Greatchem Chemicals is 1.55 times less risky than Xinjiang Beixin. It trades about -0.19 of its potential returns per unit of risk. Xinjiang Beixin RoadBridge is currently generating about -0.16 per unit of risk. If you would invest  2,560  in Yingde Greatchem Chemicals on October 8, 2024 and sell it today you would lose (425.00) from holding Yingde Greatchem Chemicals or give up 16.6% of portfolio value over 90 days.

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

Yingde Greatchem Chemicals  vs.  Xinjiang Beixin RoadBridge

Yingde Greatchem Che

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yingde Greatchem Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Xinjiang Beixin Road

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Yingde Greatchem and Xinjiang Beixin

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

The idea behind Yingde Greatchem Chemicals and Xinjiang Beixin RoadBridge 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.