Correlation Between Xiangpiaopiao Food and Xilong Chemical

Can any of the company-specific risk be diversified away by investing in both Xiangpiaopiao Food and Xilong Chemical 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 Xiangpiaopiao Food and Xilong Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xiangpiaopiao Food Co and Xilong Chemical Co, you can compare the effects of market volatilities on Xiangpiaopiao Food and Xilong Chemical 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 Xiangpiaopiao Food with a short position of Xilong Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiangpiaopiao Food and Xilong Chemical.

Diversification Opportunities for Xiangpiaopiao Food and Xilong Chemical

0.62

Correlation Coefficient

Xiangpiaopiao Food  Xilong Chemical

Poor diversification

The 3 months correlation between Xiangpiaopiao and Xilong is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Xiangpiaopiao Food Co and Xilong Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xilong Chemical and Xiangpiaopiao Food 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 Xiangpiaopiao Food Co are associated (or correlated) with Xilong Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xilong Chemical has no effect on the direction of Xiangpiaopiao Food i.e., Xiangpiaopiao Food and Xilong Chemical go up and down completely randomly.

Pair Corralation between Xiangpiaopiao Food and Xilong Chemical

Assuming the 90 days trading horizon Xiangpiaopiao Food Co is expected to generate 1.01 times more return on investment than Xilong Chemical. However, Xiangpiaopiao Food is 1.01 times more volatile than Xilong Chemical Co. It trades about 0.07 of its potential returns per unit of risk. Xilong Chemical Co is currently generating about 0.04 per unit of risk. If you would invest  1,157  in Xiangpiaopiao Food Co on October 2, 2024 and sell it today you would earn a total of  550.00  from holding Xiangpiaopiao Food Co or generate 47.54% return on investment over 90 days.

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

Xiangpiaopiao Food Co  vs.  Xilong Chemical Co

Xiangpiaopiao Food

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xiangpiaopiao Food Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiangpiaopiao Food sustained solid returns over the last few months and may actually be approaching a breakup point.

Xilong Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Xiangpiaopiao Food and Xilong Chemical

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

The idea behind Xiangpiaopiao Food Co and Xilong Chemical 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.