Correlation Between Xingguang Agricultural and BTG Hotels

Can any of the company-specific risk be diversified away by investing in both Xingguang Agricultural and BTG Hotels 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 Xingguang Agricultural and BTG Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xingguang Agricultural Mach and BTG Hotels Group, you can compare the effects of market volatilities on Xingguang Agricultural and BTG Hotels 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 Xingguang Agricultural with a short position of BTG Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xingguang Agricultural and BTG Hotels.

Diversification Opportunities for Xingguang Agricultural and BTG Hotels

0.54

Correlation Coefficient

Xingguang Agricultural  BTG Hotels

Very weak diversification

The 3 months correlation between Xingguang and BTG is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Xingguang Agricultural Mach and BTG Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTG Hotels Group and Xingguang Agricultural 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 Xingguang Agricultural Mach are associated (or correlated) with BTG Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTG Hotels Group has no effect on the direction of Xingguang Agricultural i.e., Xingguang Agricultural and BTG Hotels go up and down completely randomly.

Pair Corralation between Xingguang Agricultural and BTG Hotels

Assuming the 90 days trading horizon Xingguang Agricultural Mach is expected to generate 3.28 times more return on investment than BTG Hotels. However, Xingguang Agricultural is 3.28 times more volatile than BTG Hotels Group. It trades about -0.01 of its potential returns per unit of risk. BTG Hotels Group is currently generating about -0.09 per unit of risk. If you would invest  786.00  in Xingguang Agricultural Mach on December 30, 2024 and sell it today you would lose (75.00) from holding Xingguang Agricultural Mach or give up 9.54% of portfolio value over 90 days.

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

Xingguang Agricultural Mach  vs.  BTG Hotels Group

Xingguang Agricultural

Risk-Adjusted Performance

Very Weak

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

BTG Hotels Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days BTG Hotels Group 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.

Pair Trading with Xingguang Agricultural and BTG Hotels

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

The idea behind Xingguang Agricultural Mach and BTG Hotels Group 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.