Correlation Between Xinjiang Baodi and Chongqing Shunbo

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

Diversification Opportunities for Xinjiang Baodi and Chongqing Shunbo

0.48

Correlation Coefficient

Xinjiang Baodi  Chongqing Shunbo

Very weak diversification

The 3 months correlation between Xinjiang and Chongqing is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Xinjiang Baodi Mining and Chongqing Shunbo Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Shunbo 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 Chongqing Shunbo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Shunbo Aluminum has no effect on the direction of Xinjiang Baodi i.e., Xinjiang Baodi and Chongqing Shunbo go up and down completely randomly.

Pair Corralation between Xinjiang Baodi and Chongqing Shunbo

Assuming the 90 days trading horizon Xinjiang Baodi Mining is expected to under-perform the Chongqing Shunbo. In addition to that, Xinjiang Baodi is 1.18 times more volatile than Chongqing Shunbo Aluminum. It trades about 0.0 of its total potential returns per unit of risk. Chongqing Shunbo Aluminum is currently generating about 0.02 per unit of volatility. If you would invest  649.00  in Chongqing Shunbo Aluminum on October 27, 2024 and sell it today you would earn a total of  12.00  from holding Chongqing Shunbo Aluminum or generate 1.85% return on investment over 90 days.

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

Xinjiang Baodi Mining  vs.  Chongqing Shunbo Aluminum

Xinjiang Baodi Mining

Risk-Adjusted Performance

0 of 100

Very Weak

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

Chongqing Shunbo Aluminum

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Shunbo Aluminum are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Chongqing Shunbo 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 Chongqing Shunbo

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

The idea behind Xinjiang Baodi Mining and Chongqing Shunbo 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.