Correlation Between Xiamen Goldenhome and Zhangjiagang Freetrade

Can any of the company-specific risk be diversified away by investing in both Xiamen Goldenhome and Zhangjiagang Freetrade 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 Zhangjiagang Freetrade 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 Zhangjiagang Freetrade Science, you can compare the effects of market volatilities on Xiamen Goldenhome and Zhangjiagang Freetrade 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 Zhangjiagang Freetrade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiamen Goldenhome and Zhangjiagang Freetrade.

Diversification Opportunities for Xiamen Goldenhome and Zhangjiagang Freetrade

0.82

Correlation Coefficient

Xiamen Goldenhome  Zhangjiagang Freetrade

Very poor diversification

The 3 months correlation between Xiamen and Zhangjiagang is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Xiamen Goldenhome Co and Zhangjiagang Freetrade Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhangjiagang Freetrade 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 Zhangjiagang Freetrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhangjiagang Freetrade has no effect on the direction of Xiamen Goldenhome i.e., Xiamen Goldenhome and Zhangjiagang Freetrade go up and down completely randomly.

Pair Corralation between Xiamen Goldenhome and Zhangjiagang Freetrade

Assuming the 90 days trading horizon Xiamen Goldenhome Co is expected to generate 1.27 times more return on investment than Zhangjiagang Freetrade. However, Xiamen Goldenhome is 1.27 times more volatile than Zhangjiagang Freetrade Science. It trades about -0.09 of its potential returns per unit of risk. Zhangjiagang Freetrade Science is currently generating about -0.17 per unit of risk. If you would invest  2,180  in Xiamen Goldenhome Co on December 2, 2024 and sell it today you would lose (269.00) from holding Xiamen Goldenhome Co or give up 12.34% of portfolio value over 90 days.

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

Xiamen Goldenhome Co  vs.  Zhangjiagang Freetrade Science

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.

Zhangjiagang Freetrade

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zhangjiagang Freetrade Science 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Xiamen Goldenhome and Zhangjiagang Freetrade

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

The idea behind Xiamen Goldenhome Co and Zhangjiagang Freetrade Science 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 Anywhere module to track or share privately all of your investments from the convenience of any device.