Correlation Between Xinjiang Baodi and Guangzhou Boji

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

Diversification Opportunities for Xinjiang Baodi and Guangzhou Boji

0.59

Correlation Coefficient

Xinjiang Baodi  Guangzhou Boji

Very weak diversification

The 3 months correlation between Xinjiang and Guangzhou is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Xinjiang Baodi Mining and Guangzhou Boji Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Boji Medical 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 Guangzhou Boji. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Boji Medical has no effect on the direction of Xinjiang Baodi i.e., Xinjiang Baodi and Guangzhou Boji go up and down completely randomly.

Pair Corralation between Xinjiang Baodi and Guangzhou Boji

Assuming the 90 days trading horizon Xinjiang Baodi Mining is expected to generate 0.77 times more return on investment than Guangzhou Boji. However, Xinjiang Baodi Mining is 1.29 times less risky than Guangzhou Boji. It trades about 0.05 of its potential returns per unit of risk. Guangzhou Boji Medical is currently generating about -0.06 per unit of risk. If you would invest  664.00  in Xinjiang Baodi Mining on October 4, 2024 and sell it today you would earn a total of  36.00  from holding Xinjiang Baodi Mining or generate 5.42% 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.  Guangzhou Boji Medical

Xinjiang Baodi Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Baodi Mining are ranked lower than 3 (%) 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.

Guangzhou Boji Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guangzhou Boji Medical 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 Guangzhou Boji

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

The idea behind Xinjiang Baodi Mining and Guangzhou Boji Medical 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.