Correlation Between Xinjiang Baodi and Guangdong Jinming

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

Diversification Opportunities for Xinjiang Baodi and Guangdong Jinming

-0.1

Correlation Coefficient

Xinjiang Baodi  Guangdong Jinming

Good diversification

The 3 months correlation between Xinjiang and Guangdong is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Xinjiang Baodi Mining and Guangdong Jinming Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Jinming 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 Guangdong Jinming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Jinming has no effect on the direction of Xinjiang Baodi i.e., Xinjiang Baodi and Guangdong Jinming go up and down completely randomly.

Pair Corralation between Xinjiang Baodi and Guangdong Jinming

Assuming the 90 days trading horizon Xinjiang Baodi Mining is expected to under-perform the Guangdong Jinming. But the stock apears to be less risky and, when comparing its historical volatility, Xinjiang Baodi Mining is 1.2 times less risky than Guangdong Jinming. The stock trades about -0.04 of its potential returns per unit of risk. The Guangdong Jinming Machinery is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  577.00  in Guangdong Jinming Machinery on December 26, 2024 and sell it today you would earn a total of  95.00  from holding Guangdong Jinming Machinery or generate 16.46% return on investment over 90 days.

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

Xinjiang Baodi Mining  vs.  Guangdong Jinming Machinery

Xinjiang Baodi Mining

Risk-Adjusted Performance

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.

Guangdong Jinming

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Jinming Machinery are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Jinming sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xinjiang Baodi and Guangdong Jinming

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

The idea behind Xinjiang Baodi Mining and Guangdong Jinming Machinery 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.