Correlation Between Industrial and Xiamen ITG

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

By analyzing existing cross correlation between Industrial and Commercial and Xiamen ITG Group, you can compare the effects of market volatilities on Industrial and Xiamen ITG 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 Industrial with a short position of Xiamen ITG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and Xiamen ITG.

Diversification Opportunities for Industrial and Xiamen ITG

0.0

Correlation Coefficient

Industrial  Xiamen ITG

Pay attention - limited upside

The 3 months correlation between Industrial and Xiamen is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Xiamen ITG Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiamen ITG Group and Industrial 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 Industrial and Commercial are associated (or correlated) with Xiamen ITG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiamen ITG Group has no effect on the direction of Industrial i.e., Industrial and Xiamen ITG go up and down completely randomly.

Pair Corralation between Industrial and Xiamen ITG

Assuming the 90 days trading horizon Industrial and Commercial is expected to generate 1.13 times more return on investment than Xiamen ITG. However, Industrial is 1.13 times more volatile than Xiamen ITG Group. It trades about -0.01 of its potential returns per unit of risk. Xiamen ITG Group is currently generating about -0.04 per unit of risk. If you would invest  693.00  in Industrial and Commercial on December 26, 2024 and sell it today you would lose (8.00) from holding Industrial and Commercial or give up 1.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Industrial and Commercial  vs.  Xiamen ITG Group

Industrial and Commercial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Industrial and Commercial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Xiamen ITG Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xiamen ITG Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Xiamen ITG is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Industrial and Xiamen ITG

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

The idea behind Industrial and Commercial and Xiamen ITG Group 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.