Correlation Between Xinhua Winshare and Henan Shenhuo

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

By analyzing existing cross correlation between Xinhua Winshare Publishing and Henan Shenhuo Coal, you can compare the effects of market volatilities on Xinhua Winshare and Henan Shenhuo 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 Xinhua Winshare with a short position of Henan Shenhuo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinhua Winshare and Henan Shenhuo.

Diversification Opportunities for Xinhua Winshare and Henan Shenhuo

0.2

Correlation Coefficient

Xinhua Winshare  Henan Shenhuo

Modest diversification

The 3 months correlation between Xinhua and Henan is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Xinhua Winshare Publishing and Henan Shenhuo Coal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henan Shenhuo Coal and Xinhua Winshare 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 Xinhua Winshare Publishing are associated (or correlated) with Henan Shenhuo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henan Shenhuo Coal has no effect on the direction of Xinhua Winshare i.e., Xinhua Winshare and Henan Shenhuo go up and down completely randomly.

Pair Corralation between Xinhua Winshare and Henan Shenhuo

Assuming the 90 days trading horizon Xinhua Winshare Publishing is expected to generate 0.72 times more return on investment than Henan Shenhuo. However, Xinhua Winshare Publishing is 1.38 times less risky than Henan Shenhuo. It trades about 0.33 of its potential returns per unit of risk. Henan Shenhuo Coal is currently generating about 0.04 per unit of risk. If you would invest  1,436  in Xinhua Winshare Publishing on September 28, 2024 and sell it today you would earn a total of  165.00  from holding Xinhua Winshare Publishing or generate 11.49% return on investment over 90 days.

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

Xinhua Winshare Publishing  vs.  Henan Shenhuo Coal

Xinhua Winshare Publ

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xinhua Winshare Publishing are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Xinhua Winshare is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Henan Shenhuo Coal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Henan Shenhuo Coal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Xinhua Winshare and Henan Shenhuo

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

The idea behind Xinhua Winshare Publishing and Henan Shenhuo Coal 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.