Correlation Between Xinke Material and Midea Group

Can any of the company-specific risk be diversified away by investing in both Xinke Material and Midea Group 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 Xinke Material and Midea Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xinke Material and Midea Group Co, you can compare the effects of market volatilities on Xinke Material and Midea Group 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 Xinke Material with a short position of Midea Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinke Material and Midea Group.

Diversification Opportunities for Xinke Material and Midea Group

0.21

Correlation Coefficient

Xinke Material  Midea Group

Modest diversification

The 3 months correlation between Xinke and Midea is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Xinke Material and Midea Group Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midea Group and Xinke Material 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 Xinke Material are associated (or correlated) with Midea Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midea Group has no effect on the direction of Xinke Material i.e., Xinke Material and Midea Group go up and down completely randomly.

Pair Corralation between Xinke Material and Midea Group

Assuming the 90 days trading horizon Xinke Material is expected to generate 3.19 times more return on investment than Midea Group. However, Xinke Material is 3.19 times more volatile than Midea Group Co. It trades about 0.21 of its potential returns per unit of risk. Midea Group Co is currently generating about 0.01 per unit of risk. If you would invest  197.00  in Xinke Material on October 9, 2024 and sell it today you would earn a total of  150.00  from holding Xinke Material or generate 76.14% return on investment over 90 days.

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

Xinke Material  vs.  Midea Group Co

Xinke Material

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xinke Material are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinke Material sustained solid returns over the last few months and may actually be approaching a breakup point.

Midea Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Xinke Material and Midea Group

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

The idea behind Xinke Material and Midea Group 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.