Correlation Between Xinjiang Baodi and Hainan Shuangcheng

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

Diversification Opportunities for Xinjiang Baodi and Hainan Shuangcheng

-0.45

Correlation Coefficient

Xinjiang Baodi  Hainan Shuangcheng

Very good diversification

The 3 months correlation between Xinjiang and Hainan is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Xinjiang Baodi Mining and Hainan Shuangcheng Pharmaceut in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Shuangcheng 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 Hainan Shuangcheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Shuangcheng has no effect on the direction of Xinjiang Baodi i.e., Xinjiang Baodi and Hainan Shuangcheng go up and down completely randomly.

Pair Corralation between Xinjiang Baodi and Hainan Shuangcheng

Assuming the 90 days trading horizon Xinjiang Baodi is expected to generate 4.17 times less return on investment than Hainan Shuangcheng. But when comparing it to its historical volatility, Xinjiang Baodi Mining is 1.51 times less risky than Hainan Shuangcheng. It trades about 0.02 of its potential returns per unit of risk. Hainan Shuangcheng Pharmaceut is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  715.00  in Hainan Shuangcheng Pharmaceut on October 11, 2024 and sell it today you would earn a total of  920.00  from holding Hainan Shuangcheng Pharmaceut or generate 128.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.5%
Values	Daily Returns

Xinjiang Baodi Mining  vs.  Hainan Shuangcheng Pharmaceut

Xinjiang Baodi Mining

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Baodi Mining are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinjiang Baodi sustained solid returns over the last few months and may actually be approaching a breakup point.

Hainan Shuangcheng

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Shuangcheng Pharmaceut are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hainan Shuangcheng sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xinjiang Baodi and Hainan Shuangcheng

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

The idea behind Xinjiang Baodi Mining and Hainan Shuangcheng Pharmaceut 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.