Correlation Between Xingguang Agricultural and Bank of Communications

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

Diversification Opportunities for Xingguang Agricultural and Bank of Communications

-0.1

Correlation Coefficient

Xingguang Agricultural  Bank of Communications

Good diversification

The 3 months correlation between Xingguang and Bank is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Xingguang Agricultural Mach and Bank of Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Communications 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 Bank of Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Communications has no effect on the direction of Xingguang Agricultural i.e., Xingguang Agricultural and Bank of Communications go up and down completely randomly.

Pair Corralation between Xingguang Agricultural and Bank of Communications

Assuming the 90 days trading horizon Xingguang Agricultural Mach is expected to under-perform the Bank of Communications. In addition to that, Xingguang Agricultural is 2.9 times more volatile than Bank of Communications. It trades about -0.05 of its total potential returns per unit of risk. Bank of Communications is currently generating about 0.03 per unit of volatility. If you would invest  726.00  in Bank of Communications on October 26, 2024 and sell it today you would earn a total of  14.00  from holding Bank of Communications or generate 1.93% return on investment over 90 days.

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

Xingguang Agricultural Mach  vs.  Bank of Communications

Xingguang Agricultural

Risk-Adjusted Performance

0 of 100

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 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.

Bank of Communications

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Communications are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Bank of Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Xingguang Agricultural and Bank of Communications

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

The idea behind Xingguang Agricultural Mach and Bank of Communications 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.