Correlation Between Xiamen Bank and Minmetals Capital

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

Diversification Opportunities for Xiamen Bank and Minmetals Capital

0.81

Correlation Coefficient

Xiamen Bank  Minmetals Capital

Very poor diversification

The 3 months correlation between Xiamen and Minmetals is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Xiamen Bank Co and Minmetals Capital Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Minmetals Capital 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 Minmetals Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Minmetals Capital has no effect on the direction of Xiamen Bank i.e., Xiamen Bank and Minmetals Capital go up and down completely randomly.

Pair Corralation between Xiamen Bank and Minmetals Capital

Assuming the 90 days trading horizon Xiamen Bank Co is expected to generate 0.94 times more return on investment than Minmetals Capital. However, Xiamen Bank Co is 1.06 times less risky than Minmetals Capital. It trades about 0.08 of its potential returns per unit of risk. Minmetals Capital Co is currently generating about -0.28 per unit of risk. If you would invest  551.00  in Xiamen Bank Co on September 19, 2024 and sell it today you would earn a total of  17.00  from holding Xiamen Bank Co or generate 3.09% 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.  Minmetals Capital Co

Xiamen Bank

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xiamen Bank Co are ranked lower than 15 (%) 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.

Minmetals Capital

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Minmetals Capital Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Minmetals Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xiamen Bank and Minmetals Capital

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

The idea behind Xiamen Bank Co and Minmetals Capital Co 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .