Correlation Between Xiamen Bank and Shenzhen Centralcon

Can any of the company-specific risk be diversified away by investing in both Xiamen Bank and Shenzhen Centralcon 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 Xiamen Bank and Shenzhen Centralcon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xiamen Bank Co and Shenzhen Centralcon Investment, you can compare the effects of market volatilities on Xiamen Bank and Shenzhen Centralcon 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 Xiamen Bank with a short position of Shenzhen Centralcon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiamen Bank and Shenzhen Centralcon.

Diversification Opportunities for Xiamen Bank and Shenzhen Centralcon

0.49

Correlation Coefficient

Xiamen Bank  Shenzhen Centralcon

Very weak diversification

The 3 months correlation between Xiamen and Shenzhen is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Xiamen Bank Co and Shenzhen Centralcon Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Centralcon and Xiamen Bank 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 Xiamen Bank Co are associated (or correlated) with Shenzhen Centralcon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Centralcon has no effect on the direction of Xiamen Bank i.e., Xiamen Bank and Shenzhen Centralcon go up and down completely randomly.

Pair Corralation between Xiamen Bank and Shenzhen Centralcon

Assuming the 90 days trading horizon Xiamen Bank Co is expected to generate 0.41 times more return on investment than Shenzhen Centralcon. However, Xiamen Bank Co is 2.43 times less risky than Shenzhen Centralcon. It trades about 0.04 of its potential returns per unit of risk. Shenzhen Centralcon Investment is currently generating about -0.02 per unit of risk. If you would invest  466.00  in Xiamen Bank Co on October 4, 2024 and sell it today you would earn a total of  98.00  from holding Xiamen Bank Co or generate 21.03% return on investment over 90 days.

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

Xiamen Bank Co  vs.  Shenzhen Centralcon Investment

Xiamen Bank

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xiamen Bank Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Xiamen Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shenzhen Centralcon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen Centralcon Investment 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 Xiamen Bank and Shenzhen Centralcon

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

The idea behind Xiamen Bank Co and Shenzhen Centralcon Investment 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.