Correlation Between Xiamen Goldenhome and Shandong Sinoglory

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

Diversification Opportunities for Xiamen Goldenhome and Shandong Sinoglory

0.97

Correlation Coefficient

Xiamen Goldenhome  Shandong Sinoglory

Almost no diversification

The 3 months correlation between Xiamen and Shandong is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Xiamen Goldenhome Co and Shandong Sinoglory Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Sinoglory Health 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 Shandong Sinoglory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Sinoglory Health has no effect on the direction of Xiamen Goldenhome i.e., Xiamen Goldenhome and Shandong Sinoglory go up and down completely randomly.

Pair Corralation between Xiamen Goldenhome and Shandong Sinoglory

Assuming the 90 days trading horizon Xiamen Goldenhome Co is expected to generate 1.24 times more return on investment than Shandong Sinoglory. However, Xiamen Goldenhome is 1.24 times more volatile than Shandong Sinoglory Health. It trades about -0.01 of its potential returns per unit of risk. Shandong Sinoglory Health is currently generating about -0.02 per unit of risk. If you would invest  2,805  in Xiamen Goldenhome Co on September 20, 2024 and sell it today you would lose (605.00) from holding Xiamen Goldenhome Co or give up 21.57% of portfolio value over 90 days.

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

Xiamen Goldenhome Co  vs.  Shandong Sinoglory Health

Xiamen Goldenhome

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xiamen Goldenhome Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiamen Goldenhome sustained solid returns over the last few months and may actually be approaching a breakup point.

Shandong Sinoglory Health

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Sinoglory Health are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Sinoglory sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xiamen Goldenhome and Shandong Sinoglory

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

The idea behind Xiamen Goldenhome Co and Shandong Sinoglory Health 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.