Correlation Between Xinhua Winshare and Qingdao Citymedia

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

Diversification Opportunities for Xinhua Winshare and Qingdao Citymedia

0.42

Correlation Coefficient

Xinhua Winshare  Qingdao Citymedia

Very weak diversification

The 3 months correlation between Xinhua and Qingdao is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Xinhua Winshare Publishing and Qingdao Citymedia Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qingdao Citymedia 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 Qingdao Citymedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qingdao Citymedia has no effect on the direction of Xinhua Winshare i.e., Xinhua Winshare and Qingdao Citymedia go up and down completely randomly.

Pair Corralation between Xinhua Winshare and Qingdao Citymedia

Assuming the 90 days trading horizon Xinhua Winshare Publishing is expected to generate 0.59 times more return on investment than Qingdao Citymedia. However, Xinhua Winshare Publishing is 1.7 times less risky than Qingdao Citymedia. It trades about 0.31 of its potential returns per unit of risk. Qingdao Citymedia Co is currently generating about -0.1 per unit of risk. If you would invest  1,434  in Xinhua Winshare Publishing on September 29, 2024 and sell it today you would earn a total of  154.00  from holding Xinhua Winshare Publishing or generate 10.74% return on investment over 90 days.

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

Xinhua Winshare Publishing  vs.  Qingdao Citymedia Co

Xinhua Winshare Publ

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xinhua Winshare Publishing are ranked lower than 1 (%) 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.

Qingdao Citymedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Qingdao Citymedia Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Qingdao Citymedia 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 Qingdao Citymedia

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

The idea behind Xinhua Winshare Publishing and Qingdao Citymedia 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.