Correlation Between Xinjiang Baodi and Anhui Deli

Can any of the company-specific risk be diversified away by investing in both Xinjiang Baodi and Anhui Deli 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 Anhui Deli 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 Anhui Deli Household, you can compare the effects of market volatilities on Xinjiang Baodi and Anhui Deli 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 Anhui Deli. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinjiang Baodi and Anhui Deli.

Diversification Opportunities for Xinjiang Baodi and Anhui Deli

0.55

Correlation Coefficient

Xinjiang Baodi  Anhui Deli

Very weak diversification

The 3 months correlation between Xinjiang and Anhui is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Xinjiang Baodi Mining and Anhui Deli Household in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Deli Household 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 Anhui Deli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Deli Household has no effect on the direction of Xinjiang Baodi i.e., Xinjiang Baodi and Anhui Deli go up and down completely randomly.

Pair Corralation between Xinjiang Baodi and Anhui Deli

Assuming the 90 days trading horizon Xinjiang Baodi Mining is expected to generate 0.95 times more return on investment than Anhui Deli. However, Xinjiang Baodi Mining is 1.06 times less risky than Anhui Deli. It trades about 0.03 of its potential returns per unit of risk. Anhui Deli Household is currently generating about -0.01 per unit of risk. If you would invest  604.00  in Xinjiang Baodi Mining on September 28, 2024 and sell it today you would earn a total of  105.00  from holding Xinjiang Baodi Mining or generate 17.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	86.59%
Values	Daily Returns

Xinjiang Baodi Mining  vs.  Anhui Deli Household

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 January 2025.

Anhui Deli Household

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anhui Deli Household 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 Xinjiang Baodi and Anhui Deli

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

The idea behind Xinjiang Baodi Mining and Anhui Deli Household 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.