Correlation Between Xinjiang Tianrun and Chinese Universe

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

By analyzing existing cross correlation between Xinjiang Tianrun Dairy and Chinese Universe Publishing, you can compare the effects of market volatilities on Xinjiang Tianrun and Chinese Universe 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 Xinjiang Tianrun with a short position of Chinese Universe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinjiang Tianrun and Chinese Universe.

Diversification Opportunities for Xinjiang Tianrun and Chinese Universe

-0.52

Correlation Coefficient

Xinjiang Tianrun  Chinese Universe

Excellent diversification

The 3 months correlation between Xinjiang and Chinese is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Xinjiang Tianrun Dairy and Chinese Universe Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chinese Universe Pub and Xinjiang Tianrun 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 Xinjiang Tianrun Dairy are associated (or correlated) with Chinese Universe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chinese Universe Pub has no effect on the direction of Xinjiang Tianrun i.e., Xinjiang Tianrun and Chinese Universe go up and down completely randomly.

Pair Corralation between Xinjiang Tianrun and Chinese Universe

Assuming the 90 days trading horizon Xinjiang Tianrun Dairy is expected to generate 1.08 times more return on investment than Chinese Universe. However, Xinjiang Tianrun is 1.08 times more volatile than Chinese Universe Publishing. It trades about 0.07 of its potential returns per unit of risk. Chinese Universe Publishing is currently generating about -0.05 per unit of risk. If you would invest  791.00  in Xinjiang Tianrun Dairy on September 28, 2024 and sell it today you would earn a total of  168.00  from holding Xinjiang Tianrun Dairy or generate 21.24% return on investment over 90 days.

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

Xinjiang Tianrun Dairy  vs.  Chinese Universe Publishing

Xinjiang Tianrun Dairy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Tianrun Dairy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinjiang Tianrun may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Chinese Universe Pub

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chinese Universe Publishing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Xinjiang Tianrun and Chinese Universe

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

The idea behind Xinjiang Tianrun Dairy and Chinese Universe Publishing 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.