Correlation Between Dongxing Sec and XiaMen HongXin

Can any of the company-specific risk be diversified away by investing in both Dongxing Sec and XiaMen HongXin 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 Dongxing Sec and XiaMen HongXin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dongxing Sec Co and XiaMen HongXin Electron tech, you can compare the effects of market volatilities on Dongxing Sec and XiaMen HongXin 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 Dongxing Sec with a short position of XiaMen HongXin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongxing Sec and XiaMen HongXin.

Diversification Opportunities for Dongxing Sec and XiaMen HongXin

0.72

Correlation Coefficient

Dongxing Sec  XiaMen HongXin

Poor diversification

The 3 months correlation between Dongxing and XiaMen is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Dongxing Sec Co and XiaMen HongXin Electron tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XiaMen HongXin Electron and Dongxing Sec 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 Dongxing Sec Co are associated (or correlated) with XiaMen HongXin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XiaMen HongXin Electron has no effect on the direction of Dongxing Sec i.e., Dongxing Sec and XiaMen HongXin go up and down completely randomly.

Pair Corralation between Dongxing Sec and XiaMen HongXin

Assuming the 90 days trading horizon Dongxing Sec is expected to generate 25.3 times less return on investment than XiaMen HongXin. But when comparing it to its historical volatility, Dongxing Sec Co is 2.68 times less risky than XiaMen HongXin. It trades about 0.02 of its potential returns per unit of risk. XiaMen HongXin Electron tech is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,310  in XiaMen HongXin Electron tech on December 27, 2024 and sell it today you would earn a total of  1,211  from holding XiaMen HongXin Electron tech or generate 52.42% return on investment over 90 days.

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

Dongxing Sec Co  vs.  XiaMen HongXin Electron tech

Dongxing Sec

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dongxing Sec Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dongxing Sec is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

XiaMen HongXin Electron

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in XiaMen HongXin Electron tech are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, XiaMen HongXin sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dongxing Sec and XiaMen HongXin

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

The idea behind Dongxing Sec Co and XiaMen HongXin Electron tech 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.