Correlation Between Xinhua Winshare and Xiangtan Electrochemical

Can any of the company-specific risk be diversified away by investing in both Xinhua Winshare and Xiangtan Electrochemical 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 Xiangtan Electrochemical 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 Xiangtan Electrochemical Scientific, you can compare the effects of market volatilities on Xinhua Winshare and Xiangtan Electrochemical 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 Xiangtan Electrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinhua Winshare and Xiangtan Electrochemical.

Diversification Opportunities for Xinhua Winshare and Xiangtan Electrochemical

-0.36

Correlation Coefficient

Xinhua Winshare  Xiangtan Electrochemical

Very good diversification

The 3 months correlation between Xinhua and Xiangtan is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Xinhua Winshare Publishing and Xiangtan Electrochemical Scien in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiangtan Electrochemical 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 Xiangtan Electrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiangtan Electrochemical has no effect on the direction of Xinhua Winshare i.e., Xinhua Winshare and Xiangtan Electrochemical go up and down completely randomly.

Pair Corralation between Xinhua Winshare and Xiangtan Electrochemical

Assuming the 90 days trading horizon Xinhua Winshare Publishing is expected to generate 0.88 times more return on investment than Xiangtan Electrochemical. However, Xinhua Winshare Publishing is 1.13 times less risky than Xiangtan Electrochemical. It trades about -0.03 of its potential returns per unit of risk. Xiangtan Electrochemical Scientific is currently generating about -0.05 per unit of risk. If you would invest  1,438  in Xinhua Winshare Publishing on December 2, 2024 and sell it today you would lose (49.00) from holding Xinhua Winshare Publishing or give up 3.41% of portfolio value over 90 days.

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

Xinhua Winshare Publishing  vs.  Xiangtan Electrochemical Scien

Xinhua Winshare Publ

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xinhua Winshare Publishing has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Xiangtan Electrochemical

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Xinhua Winshare and Xiangtan Electrochemical

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

The idea behind Xinhua Winshare Publishing and Xiangtan Electrochemical Scientific 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.