Correlation Between Xiamen Bank and Songz Automobile

Can any of the company-specific risk be diversified away by investing in both Xiamen Bank and Songz Automobile 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 Songz Automobile 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 Songz Automobile Air, you can compare the effects of market volatilities on Xiamen Bank and Songz Automobile 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 Songz Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiamen Bank and Songz Automobile.

Diversification Opportunities for Xiamen Bank and Songz Automobile

0.89

Correlation Coefficient

Xiamen Bank  Songz Automobile

Very poor diversification

The 3 months correlation between Xiamen and Songz is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Xiamen Bank Co and Songz Automobile Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Songz Automobile Air 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 Songz Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Songz Automobile Air has no effect on the direction of Xiamen Bank i.e., Xiamen Bank and Songz Automobile go up and down completely randomly.

Pair Corralation between Xiamen Bank and Songz Automobile

Assuming the 90 days trading horizon Xiamen Bank Co is expected to generate 0.99 times more return on investment than Songz Automobile. However, Xiamen Bank Co is 1.01 times less risky than Songz Automobile. It trades about 0.03 of its potential returns per unit of risk. Songz Automobile Air is currently generating about -0.04 per unit of risk. If you would invest  566.00  in Xiamen Bank Co on September 20, 2024 and sell it today you would earn a total of  4.00  from holding Xiamen Bank Co or generate 0.71% return on investment over 90 days.

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

Xiamen Bank Co  vs.  Songz Automobile Air

Xiamen Bank

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xiamen Bank Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiamen Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Songz Automobile Air

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Songz Automobile Air are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Songz Automobile sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xiamen Bank and Songz Automobile

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

The idea behind Xiamen Bank Co and Songz Automobile Air 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.