Correlation Between Xinya Electronic and Jiaozuo Wanfang

Can any of the company-specific risk be diversified away by investing in both Xinya Electronic and Jiaozuo Wanfang 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 Xinya Electronic and Jiaozuo Wanfang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xinya Electronic Co and Jiaozuo Wanfang Aluminum, you can compare the effects of market volatilities on Xinya Electronic and Jiaozuo Wanfang 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 Xinya Electronic with a short position of Jiaozuo Wanfang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinya Electronic and Jiaozuo Wanfang.

Diversification Opportunities for Xinya Electronic and Jiaozuo Wanfang

-0.09

Correlation Coefficient

Xinya Electronic  Jiaozuo Wanfang

Good diversification

The 3 months correlation between Xinya and Jiaozuo is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Xinya Electronic Co and Jiaozuo Wanfang Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiaozuo Wanfang Aluminum and Xinya Electronic 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 Xinya Electronic Co are associated (or correlated) with Jiaozuo Wanfang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiaozuo Wanfang Aluminum has no effect on the direction of Xinya Electronic i.e., Xinya Electronic and Jiaozuo Wanfang go up and down completely randomly.

Pair Corralation between Xinya Electronic and Jiaozuo Wanfang

Assuming the 90 days trading horizon Xinya Electronic Co is expected to generate 1.14 times more return on investment than Jiaozuo Wanfang. However, Xinya Electronic is 1.14 times more volatile than Jiaozuo Wanfang Aluminum. It trades about 0.04 of its potential returns per unit of risk. Jiaozuo Wanfang Aluminum is currently generating about 0.05 per unit of risk. If you would invest  1,163  in Xinya Electronic Co on October 9, 2024 and sell it today you would earn a total of  280.00  from holding Xinya Electronic Co or generate 24.08% return on investment over 90 days.

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

Xinya Electronic Co  vs.  Jiaozuo Wanfang Aluminum

Xinya Electronic

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xinya Electronic Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinya Electronic sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiaozuo Wanfang Aluminum

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jiaozuo Wanfang Aluminum are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiaozuo Wanfang may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Xinya Electronic and Jiaozuo Wanfang

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

The idea behind Xinya Electronic Co and Jiaozuo Wanfang Aluminum 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.