Correlation Between China National and Xinjiang Baodi

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

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

Diversification Opportunities for China National and Xinjiang Baodi

0.28

Correlation Coefficient

China National  Xinjiang Baodi

Modest diversification

The 3 months correlation between China and Xinjiang is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding China National Software 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 China National 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 China National Software 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 China National i.e., China National and Xinjiang Baodi go up and down completely randomly.

Pair Corralation between China National and Xinjiang Baodi

Assuming the 90 days trading horizon China National Software is expected to under-perform the Xinjiang Baodi. In addition to that, China National is 1.32 times more volatile than Xinjiang Baodi Mining. It trades about -0.1 of its total potential returns per unit of risk. Xinjiang Baodi Mining is currently generating about -0.06 per unit of volatility. If you would invest  670.00  in Xinjiang Baodi Mining on December 10, 2024 and sell it today you would lose (55.00) from holding Xinjiang Baodi Mining or give up 8.21% of portfolio value over 90 days.

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

China National Software  vs.  Xinjiang Baodi Mining

China National Software

Risk-Adjusted Performance

Very Weak

Over the last 90 days China National Software 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Xinjiang Baodi Mining

Risk-Adjusted Performance

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 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.

Pair Trading with China National and Xinjiang Baodi

The main advantage of trading using opposite China National and Xinjiang Baodi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China National 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 China National Software 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.

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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.