Correlation Between Xiamen ITG and Chengdu Spaceon

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

By analyzing existing cross correlation between Xiamen ITG Group and Chengdu Spaceon Electronics, you can compare the effects of market volatilities on Xiamen ITG and Chengdu Spaceon 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 Xiamen ITG with a short position of Chengdu Spaceon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiamen ITG and Chengdu Spaceon.

Diversification Opportunities for Xiamen ITG and Chengdu Spaceon

0.12

Correlation Coefficient

Xiamen ITG  Chengdu Spaceon

Average diversification

The 3 months correlation between Xiamen and Chengdu is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Xiamen ITG Group and Chengdu Spaceon Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chengdu Spaceon Elec and Xiamen ITG 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 Xiamen ITG Group are associated (or correlated) with Chengdu Spaceon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chengdu Spaceon Elec has no effect on the direction of Xiamen ITG i.e., Xiamen ITG and Chengdu Spaceon go up and down completely randomly.

Pair Corralation between Xiamen ITG and Chengdu Spaceon

Assuming the 90 days trading horizon Xiamen ITG is expected to generate 3.25 times less return on investment than Chengdu Spaceon. But when comparing it to its historical volatility, Xiamen ITG Group is 1.53 times less risky than Chengdu Spaceon. It trades about 0.01 of its potential returns per unit of risk. Chengdu Spaceon Electronics is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,584  in Chengdu Spaceon Electronics on October 4, 2024 and sell it today you would earn a total of  26.00  from holding Chengdu Spaceon Electronics or generate 1.64% return on investment over 90 days.

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

Xiamen ITG Group  vs.  Chengdu Spaceon Electronics

Xiamen ITG Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xiamen ITG Group 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Chengdu Spaceon Elec

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Xiamen ITG and Chengdu Spaceon

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

The idea behind Xiamen ITG Group and Chengdu Spaceon Electronics 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 Anywhere module to track or share privately all of your investments from the convenience of any device.