Correlation Between Xinke Material and Xiamen CD

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

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

Diversification Opportunities for Xinke Material and Xiamen CD

0.71

Correlation Coefficient

Xinke Material  Xiamen CD

Poor diversification

The 3 months correlation between Xinke and Xiamen is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Xinke Material and Xiamen CD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiamen CD 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 Xiamen CD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiamen CD has no effect on the direction of Xinke Material i.e., Xinke Material and Xiamen CD go up and down completely randomly.

Pair Corralation between Xinke Material and Xiamen CD

Assuming the 90 days trading horizon Xinke Material is expected to generate 4.65 times more return on investment than Xiamen CD. However, Xinke Material is 4.65 times more volatile than Xiamen CD. It trades about 0.28 of its potential returns per unit of risk. Xiamen CD is currently generating about -0.01 per unit of risk. If you would invest  273.00  in Xinke Material on October 11, 2024 and sell it today you would earn a total of  127.00  from holding Xinke Material or generate 46.52% return on investment over 90 days.

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

Xinke Material  vs.  Xiamen CD

Xinke Material

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xinke Material are ranked lower than 21 (%) 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.

Xiamen CD

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xiamen CD are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiamen CD may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Xinke Material and Xiamen CD

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

The idea behind Xinke Material and Xiamen CD 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.