Correlation Between Xiamen Goldenhome and Hangzhou Prevail

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

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

Diversification Opportunities for Xiamen Goldenhome and Hangzhou Prevail

-0.01

Correlation Coefficient

Xiamen Goldenhome  Hangzhou Prevail

Good diversification

The 3 months correlation between Xiamen and Hangzhou is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Xiamen Goldenhome Co and Hangzhou Prevail Optoelectroni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Prevail Opt and Xiamen Goldenhome 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 Xiamen Goldenhome Co are associated (or correlated) with Hangzhou Prevail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Prevail Opt has no effect on the direction of Xiamen Goldenhome i.e., Xiamen Goldenhome and Hangzhou Prevail go up and down completely randomly.

Pair Corralation between Xiamen Goldenhome and Hangzhou Prevail

Assuming the 90 days trading horizon Xiamen Goldenhome Co is expected to under-perform the Hangzhou Prevail. But the stock apears to be less risky and, when comparing its historical volatility, Xiamen Goldenhome Co is 1.65 times less risky than Hangzhou Prevail. The stock trades about -0.09 of its potential returns per unit of risk. The Hangzhou Prevail Optoelectronic is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,842  in Hangzhou Prevail Optoelectronic on December 30, 2024 and sell it today you would lose (87.00) from holding Hangzhou Prevail Optoelectronic or give up 4.72% of portfolio value over 90 days.

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

Xiamen Goldenhome Co  vs.  Hangzhou Prevail Optoelectroni

Xiamen Goldenhome

Risk-Adjusted Performance

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 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.

Hangzhou Prevail Opt

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Xiamen Goldenhome and Hangzhou Prevail

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

The idea behind Xiamen Goldenhome Co and Hangzhou Prevail Optoelectronic 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.