Correlation Between Xinjiang Baodi and Jiaozuo Wanfang

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

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

Diversification Opportunities for Xinjiang Baodi and Jiaozuo Wanfang

-0.41

Correlation Coefficient

Xinjiang Baodi  Jiaozuo Wanfang

Very good diversification

The 3 months correlation between Xinjiang and Jiaozuo is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Xinjiang Baodi Mining and Jiaozuo Wanfang Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiaozuo Wanfang Aluminum and Xinjiang Baodi 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 Baodi Mining are associated (or correlated) with Jiaozuo Wanfang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiaozuo Wanfang Aluminum has no effect on the direction of Xinjiang Baodi i.e., Xinjiang Baodi and Jiaozuo Wanfang go up and down completely randomly.

Pair Corralation between Xinjiang Baodi and Jiaozuo Wanfang

Assuming the 90 days trading horizon Xinjiang Baodi is expected to generate 1.21 times less return on investment than Jiaozuo Wanfang. In addition to that, Xinjiang Baodi is 1.11 times more volatile than Jiaozuo Wanfang Aluminum. It trades about 0.02 of its total potential returns per unit of risk. Jiaozuo Wanfang Aluminum is currently generating about 0.03 per unit of volatility. If you would invest  550.00  in Jiaozuo Wanfang Aluminum on October 12, 2024 and sell it today you would earn a total of  129.00  from holding Jiaozuo Wanfang Aluminum or generate 23.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.71%
Values	Daily Returns

Xinjiang Baodi Mining  vs.  Jiaozuo Wanfang Aluminum

Xinjiang Baodi Mining

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Baodi Mining are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinjiang Baodi may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Jiaozuo Wanfang Aluminum

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jiaozuo Wanfang Aluminum are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Jiaozuo Wanfang is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Xinjiang Baodi and Jiaozuo Wanfang

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

The idea behind Xinjiang Baodi Mining and Jiaozuo Wanfang Aluminum 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.