Correlation Between Ningxia Xiaoming and Xinjiang Daqo

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

By analyzing existing cross correlation between Ningxia Xiaoming Agriculture and Xinjiang Daqo New, you can compare the effects of market volatilities on Ningxia Xiaoming and Xinjiang Daqo 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 Ningxia Xiaoming with a short position of Xinjiang Daqo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ningxia Xiaoming and Xinjiang Daqo.

Diversification Opportunities for Ningxia Xiaoming and Xinjiang Daqo

0.24

Correlation Coefficient

Ningxia Xiaoming  Xinjiang Daqo

Modest diversification

The 3 months correlation between Ningxia and Xinjiang is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ningxia Xiaoming Agriculture and Xinjiang Daqo New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinjiang Daqo New and Ningxia Xiaoming 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 Ningxia Xiaoming Agriculture are associated (or correlated) with Xinjiang Daqo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinjiang Daqo New has no effect on the direction of Ningxia Xiaoming i.e., Ningxia Xiaoming and Xinjiang Daqo go up and down completely randomly.

Pair Corralation between Ningxia Xiaoming and Xinjiang Daqo

Assuming the 90 days trading horizon Ningxia Xiaoming Agriculture is expected to generate 0.83 times more return on investment than Xinjiang Daqo. However, Ningxia Xiaoming Agriculture is 1.2 times less risky than Xinjiang Daqo. It trades about 0.04 of its potential returns per unit of risk. Xinjiang Daqo New is currently generating about -0.04 per unit of risk. If you would invest  1,074  in Ningxia Xiaoming Agriculture on October 9, 2024 and sell it today you would earn a total of  50.00  from holding Ningxia Xiaoming Agriculture or generate 4.66% return on investment over 90 days.

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

Ningxia Xiaoming Agriculture  vs.  Xinjiang Daqo New

Ningxia Xiaoming Agr

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ningxia Xiaoming Agriculture are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningxia Xiaoming may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Xinjiang Daqo New

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xinjiang Daqo New has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Ningxia Xiaoming and Xinjiang Daqo

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

The idea behind Ningxia Xiaoming Agriculture and Xinjiang Daqo New 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.