Correlation Between Xiamen Bank and Yingde Greatchem

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

Diversification Opportunities for Xiamen Bank and Yingde Greatchem

0.47

Correlation Coefficient

Xiamen Bank  Yingde Greatchem

Very weak diversification

The 3 months correlation between Xiamen and Yingde is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Xiamen Bank Co and Yingde Greatchem Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yingde Greatchem Che 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 Yingde Greatchem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yingde Greatchem Che has no effect on the direction of Xiamen Bank i.e., Xiamen Bank and Yingde Greatchem go up and down completely randomly.

Pair Corralation between Xiamen Bank and Yingde Greatchem

Assuming the 90 days trading horizon Xiamen Bank is expected to generate 2.74 times less return on investment than Yingde Greatchem. But when comparing it to its historical volatility, Xiamen Bank Co is 1.28 times less risky than Yingde Greatchem. It trades about 0.03 of its potential returns per unit of risk. Yingde Greatchem Chemicals is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,353  in Yingde Greatchem Chemicals on December 24, 2024 and sell it today you would earn a total of  115.00  from holding Yingde Greatchem Chemicals or generate 4.89% 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.  Yingde Greatchem Chemicals

Xiamen Bank

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xiamen Bank Co are ranked lower than 2 (%) 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.

Yingde Greatchem Che

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Yingde Greatchem Chemicals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Yingde Greatchem is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Xiamen Bank and Yingde Greatchem

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

The idea behind Xiamen Bank Co and Yingde Greatchem Chemicals 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.