Correlation Between Sinotrans and Xiamen Goldenhome

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

By analyzing existing cross correlation between Sinotrans Ltd Class and Xiamen Goldenhome Co, you can compare the effects of market volatilities on Sinotrans and Xiamen Goldenhome 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 Sinotrans with a short position of Xiamen Goldenhome. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinotrans and Xiamen Goldenhome.

Diversification Opportunities for Sinotrans and Xiamen Goldenhome

0.37

Correlation Coefficient

Sinotrans  Xiamen Goldenhome

Weak diversification

The 3 months correlation between Sinotrans and Xiamen is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Sinotrans Ltd Class and Xiamen Goldenhome Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiamen Goldenhome and Sinotrans 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 Sinotrans Ltd Class are associated (or correlated) with Xiamen Goldenhome. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiamen Goldenhome has no effect on the direction of Sinotrans i.e., Sinotrans and Xiamen Goldenhome go up and down completely randomly.

Pair Corralation between Sinotrans and Xiamen Goldenhome

Assuming the 90 days trading horizon Sinotrans Ltd Class is expected to under-perform the Xiamen Goldenhome. But the stock apears to be less risky and, when comparing its historical volatility, Sinotrans Ltd Class is 1.37 times less risky than Xiamen Goldenhome. The stock trades about -0.02 of its potential returns per unit of risk. The Xiamen Goldenhome Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,069  in Xiamen Goldenhome Co on October 5, 2024 and sell it today you would lose (24.00) from holding Xiamen Goldenhome Co or give up 1.16% of portfolio value over 90 days.

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

Sinotrans Ltd Class  vs.  Xiamen Goldenhome Co

Sinotrans Class

Risk-Adjusted Performance

0 of 100

Very Weak

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

Xiamen Goldenhome

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sinotrans and Xiamen Goldenhome

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

The idea behind Sinotrans Ltd Class and Xiamen Goldenhome 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.