Correlation Between Xinke Material and Chongqing Sulian

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

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

Diversification Opportunities for Xinke Material and Chongqing Sulian

-0.05

Correlation Coefficient

Xinke Material  Chongqing Sulian

Good diversification

The 3 months correlation between Xinke and Chongqing is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Xinke Material and Chongqing Sulian Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Sulian Plastic 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 Chongqing Sulian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Sulian Plastic has no effect on the direction of Xinke Material i.e., Xinke Material and Chongqing Sulian go up and down completely randomly.

Pair Corralation between Xinke Material and Chongqing Sulian

Assuming the 90 days trading horizon Xinke Material is expected to generate 3.19 times more return on investment than Chongqing Sulian. However, Xinke Material is 3.19 times more volatile than Chongqing Sulian Plastic. It trades about 0.17 of its potential returns per unit of risk. Chongqing Sulian Plastic is currently generating about -0.31 per unit of risk. If you would invest  279.00  in Xinke Material on October 14, 2024 and sell it today you would earn a total of  66.00  from holding Xinke Material or generate 23.66% return on investment over 90 days.

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

Xinke Material  vs.  Chongqing Sulian Plastic

Xinke Material

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xinke Material are ranked lower than 15 (%) 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.

Chongqing Sulian Plastic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chongqing Sulian Plastic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Chongqing Sulian 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 Chongqing Sulian

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

The idea behind Xinke Material and Chongqing Sulian Plastic 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.