Correlation Between Xinke Material and Shenzhen Mindray

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

By analyzing existing cross correlation between Xinke Material and Shenzhen Mindray Bio Medical, you can compare the effects of market volatilities on Xinke Material and Shenzhen Mindray 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 Shenzhen Mindray. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinke Material and Shenzhen Mindray.

Diversification Opportunities for Xinke Material and Shenzhen Mindray

-0.47

Correlation Coefficient

Xinke Material  Shenzhen Mindray

Very good diversification

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

Pair Corralation between Xinke Material and Shenzhen Mindray

Assuming the 90 days trading horizon Xinke Material is expected to generate 3.65 times more return on investment than Shenzhen Mindray. However, Xinke Material is 3.65 times more volatile than Shenzhen Mindray Bio Medical. It trades about 0.16 of its potential returns per unit of risk. Shenzhen Mindray Bio Medical is currently generating about -0.03 per unit of risk. If you would invest  248.00  in Xinke Material on December 2, 2024 and sell it today you would earn a total of  138.00  from holding Xinke Material or generate 55.65% return on investment over 90 days.

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

Xinke Material  vs.  Shenzhen Mindray Bio Medical

Xinke Material

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xinke Material are ranked lower than 12 (%) 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.

Shenzhen Mindray Bio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen Mindray Bio Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shenzhen Mindray 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 Shenzhen Mindray

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

The idea behind Xinke Material and Shenzhen Mindray Bio Medical 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.