Correlation Between Caihong Display and Xingguang Agricultural

Can any of the company-specific risk be diversified away by investing in both Caihong Display and Xingguang Agricultural 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 Caihong Display and Xingguang Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Caihong Display Devices and Xingguang Agricultural Mach, you can compare the effects of market volatilities on Caihong Display and Xingguang Agricultural 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 Caihong Display with a short position of Xingguang Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caihong Display and Xingguang Agricultural.

Diversification Opportunities for Caihong Display and Xingguang Agricultural

-0.29

Correlation Coefficient

Caihong Display  Xingguang Agricultural

Very good diversification

The 3 months correlation between Caihong and Xingguang is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Caihong Display Devices and Xingguang Agricultural Mach in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xingguang Agricultural and Caihong Display 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 Caihong Display Devices are associated (or correlated) with Xingguang Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xingguang Agricultural has no effect on the direction of Caihong Display i.e., Caihong Display and Xingguang Agricultural go up and down completely randomly.

Pair Corralation between Caihong Display and Xingguang Agricultural

Assuming the 90 days trading horizon Caihong Display Devices is expected to generate 0.72 times more return on investment than Xingguang Agricultural. However, Caihong Display Devices is 1.39 times less risky than Xingguang Agricultural. It trades about 0.11 of its potential returns per unit of risk. Xingguang Agricultural Mach is currently generating about -0.05 per unit of risk. If you would invest  742.00  in Caihong Display Devices on October 26, 2024 and sell it today you would earn a total of  140.00  from holding Caihong Display Devices or generate 18.87% return on investment over 90 days.

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

Caihong Display Devices  vs.  Xingguang Agricultural Mach

Caihong Display Devices

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Caihong Display Devices are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Caihong Display sustained solid returns over the last few months and may actually be approaching a breakup point.

Xingguang Agricultural

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xingguang Agricultural Mach 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 Caihong Display and Xingguang Agricultural

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

The idea behind Caihong Display Devices and Xingguang Agricultural Mach 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.