Correlation Between Xinjiang Baodi and Hangzhou Zhongya

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

Diversification Opportunities for Xinjiang Baodi and Hangzhou Zhongya

0.3

Correlation Coefficient

Xinjiang Baodi  Hangzhou Zhongya

Weak diversification

The 3 months correlation between Xinjiang and Hangzhou is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Xinjiang Baodi Mining and Hangzhou Zhongya Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Zhongya Mac 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 Hangzhou Zhongya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Zhongya Mac has no effect on the direction of Xinjiang Baodi i.e., Xinjiang Baodi and Hangzhou Zhongya go up and down completely randomly.

Pair Corralation between Xinjiang Baodi and Hangzhou Zhongya

Assuming the 90 days trading horizon Xinjiang Baodi Mining is expected to generate 0.9 times more return on investment than Hangzhou Zhongya. However, Xinjiang Baodi Mining is 1.11 times less risky than Hangzhou Zhongya. It trades about 0.02 of its potential returns per unit of risk. Hangzhou Zhongya Machinery is currently generating about 0.01 per unit of risk. If you would invest  604.00  in Xinjiang Baodi Mining on October 11, 2024 and sell it today you would earn a total of  67.00  from holding Xinjiang Baodi Mining or generate 11.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.7%
Values	Daily Returns

Xinjiang Baodi Mining  vs.  Hangzhou Zhongya Machinery

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.

Hangzhou Zhongya Mac

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hangzhou Zhongya Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hangzhou Zhongya 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 Hangzhou Zhongya

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

The idea behind Xinjiang Baodi Mining and Hangzhou Zhongya 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.