Correlation Between Xiamen Bank and China Molybdenum

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

Diversification Opportunities for Xiamen Bank and China Molybdenum

0.24

Correlation Coefficient

Xiamen Bank  China Molybdenum

Modest diversification

The 3 months correlation between Xiamen and China is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Xiamen Bank Co and China Molybdenum Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Molybdenum 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 China Molybdenum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Molybdenum has no effect on the direction of Xiamen Bank i.e., Xiamen Bank and China Molybdenum go up and down completely randomly.

Pair Corralation between Xiamen Bank and China Molybdenum

Assuming the 90 days trading horizon Xiamen Bank Co is expected to generate 1.07 times more return on investment than China Molybdenum. However, Xiamen Bank is 1.07 times more volatile than China Molybdenum Co. It trades about 0.08 of its potential returns per unit of risk. China Molybdenum Co is currently generating about -0.11 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Xiamen Bank Co  vs.  China Molybdenum 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.

China Molybdenum

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Xiamen Bank Co and China Molybdenum 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.