Correlation Between China Building and Xiamen Amoytop

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

By analyzing existing cross correlation between China Building Material and Xiamen Amoytop Biotech, you can compare the effects of market volatilities on China Building and Xiamen Amoytop 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 China Building with a short position of Xiamen Amoytop. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Building and Xiamen Amoytop.

Diversification Opportunities for China Building and Xiamen Amoytop

-0.42

Correlation Coefficient

China Building  Xiamen Amoytop

Very good diversification

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

Pair Corralation between China Building and Xiamen Amoytop

Assuming the 90 days trading horizon China Building Material is expected to under-perform the Xiamen Amoytop. But the stock apears to be less risky and, when comparing its historical volatility, China Building Material is 1.17 times less risky than Xiamen Amoytop. The stock trades about -0.07 of its potential returns per unit of risk. The Xiamen Amoytop Biotech is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  7,460  in Xiamen Amoytop Biotech on December 24, 2024 and sell it today you would earn a total of  635.00  from holding Xiamen Amoytop Biotech or generate 8.51% return on investment over 90 days.

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

China Building Material  vs.  Xiamen Amoytop Biotech

China Building Material

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Building Material has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Xiamen Amoytop Biotech

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xiamen Amoytop Biotech are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiamen Amoytop may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with China Building and Xiamen Amoytop

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

The idea behind China Building Material and Xiamen Amoytop Biotech 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .