Correlation Between Xiamen Goldenhome and Western Mining

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

Diversification Opportunities for Xiamen Goldenhome and Western Mining

-0.21

Correlation Coefficient

Xiamen Goldenhome  Western Mining

Very good diversification

The 3 months correlation between Xiamen and Western is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Xiamen Goldenhome Co and Western Mining Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Mining 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 Western Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Mining has no effect on the direction of Xiamen Goldenhome i.e., Xiamen Goldenhome and Western Mining go up and down completely randomly.

Pair Corralation between Xiamen Goldenhome and Western Mining

Assuming the 90 days trading horizon Xiamen Goldenhome Co is expected to under-perform the Western Mining. In addition to that, Xiamen Goldenhome is 1.1 times more volatile than Western Mining Co. It trades about -0.1 of its total potential returns per unit of risk. Western Mining Co is currently generating about 0.14 per unit of volatility. If you would invest  1,631  in Western Mining Co on December 25, 2024 and sell it today you would earn a total of  192.00  from holding Western Mining Co or generate 11.77% return on investment over 90 days.

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

Xiamen Goldenhome Co  vs.  Western Mining Co

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.

Western Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Mining Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Western Mining sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xiamen Goldenhome and Western Mining

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

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