Correlation Between Chahua Modern and Xian International

Can any of the company-specific risk be diversified away by investing in both Chahua Modern and Xian International 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 Chahua Modern and Xian International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chahua Modern Housewares and Xian International Medical, you can compare the effects of market volatilities on Chahua Modern and Xian International 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 Chahua Modern with a short position of Xian International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chahua Modern and Xian International.

Diversification Opportunities for Chahua Modern and Xian International

0.87

Correlation Coefficient

Chahua Modern  Xian International

Very poor diversification

The 3 months correlation between Chahua and Xian is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Chahua Modern Housewares and Xian International Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xian International and Chahua Modern 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 Chahua Modern Housewares are associated (or correlated) with Xian International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xian International has no effect on the direction of Chahua Modern i.e., Chahua Modern and Xian International go up and down completely randomly.

Pair Corralation between Chahua Modern and Xian International

Assuming the 90 days trading horizon Chahua Modern Housewares is expected to under-perform the Xian International. In addition to that, Chahua Modern is 1.27 times more volatile than Xian International Medical. It trades about -0.1 of its total potential returns per unit of risk. Xian International Medical is currently generating about 0.1 per unit of volatility. If you would invest  567.00  in Xian International Medical on September 20, 2024 and sell it today you would earn a total of  32.00  from holding Xian International Medical or generate 5.64% return on investment over 90 days.

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

Chahua Modern Housewares  vs.  Xian International Medical

Chahua Modern Housewares

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chahua Modern Housewares are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chahua Modern sustained solid returns over the last few months and may actually be approaching a breakup point.

Xian International

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Chahua Modern and Xian International

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

The idea behind Chahua Modern Housewares and Xian International Medical 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.