Correlation Between Long Yuan and Xinjiang Baodi

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

By analyzing existing cross correlation between Long Yuan Construction and Xinjiang Baodi Mining, you can compare the effects of market volatilities on Long Yuan and Xinjiang Baodi 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 Long Yuan with a short position of Xinjiang Baodi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Long Yuan and Xinjiang Baodi.

Diversification Opportunities for Long Yuan and Xinjiang Baodi

0.27

Correlation Coefficient

Long Yuan  Xinjiang Baodi

Modest diversification

The 3 months correlation between Long and Xinjiang is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Long Yuan Construction and Xinjiang Baodi Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinjiang Baodi Mining and Long Yuan 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 Long Yuan Construction are associated (or correlated) with Xinjiang Baodi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinjiang Baodi Mining has no effect on the direction of Long Yuan i.e., Long Yuan and Xinjiang Baodi go up and down completely randomly.

Pair Corralation between Long Yuan and Xinjiang Baodi

Assuming the 90 days trading horizon Long Yuan Construction is expected to under-perform the Xinjiang Baodi. But the stock apears to be less risky and, when comparing its historical volatility, Long Yuan Construction is 1.06 times less risky than Xinjiang Baodi. The stock trades about -0.02 of its potential returns per unit of risk. The Xinjiang Baodi Mining is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  604.00  in Xinjiang Baodi Mining on October 27, 2024 and sell it today you would earn a total of  17.00  from holding Xinjiang Baodi Mining or generate 2.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.02%
Values	Daily Returns

Long Yuan Construction  vs.  Xinjiang Baodi Mining

Long Yuan Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Long Yuan Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Xinjiang Baodi Mining

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Long Yuan and Xinjiang Baodi

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

The idea behind Long Yuan Construction and Xinjiang Baodi Mining 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.