Correlation Between Xinjiang Daqo and Advanced Technology

Can any of the company-specific risk be diversified away by investing in both Xinjiang Daqo and Advanced Technology 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 Xinjiang Daqo and Advanced Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xinjiang Daqo New and Advanced Technology Materials, you can compare the effects of market volatilities on Xinjiang Daqo and Advanced Technology 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 Xinjiang Daqo with a short position of Advanced Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinjiang Daqo and Advanced Technology.

Diversification Opportunities for Xinjiang Daqo and Advanced Technology

0.23

Correlation Coefficient

Xinjiang Daqo  Advanced Technology

Modest diversification

The 3 months correlation between Xinjiang and Advanced is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Xinjiang Daqo New and Advanced Technology Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Technology and Xinjiang Daqo 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 Xinjiang Daqo New are associated (or correlated) with Advanced Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Technology has no effect on the direction of Xinjiang Daqo i.e., Xinjiang Daqo and Advanced Technology go up and down completely randomly.

Pair Corralation between Xinjiang Daqo and Advanced Technology

Assuming the 90 days trading horizon Xinjiang Daqo New is expected to under-perform the Advanced Technology. In addition to that, Xinjiang Daqo is 1.52 times more volatile than Advanced Technology Materials. It trades about -0.05 of its total potential returns per unit of risk. Advanced Technology Materials is currently generating about 0.05 per unit of volatility. If you would invest  1,051  in Advanced Technology Materials on October 4, 2024 and sell it today you would earn a total of  64.00  from holding Advanced Technology Materials or generate 6.09% return on investment over 90 days.

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

Xinjiang Daqo New  vs.  Advanced Technology Materials

Xinjiang Daqo New

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xinjiang Daqo New has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Advanced Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Technology Materials are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Advanced Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Xinjiang Daqo and Advanced Technology

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

The idea behind Xinjiang Daqo New and Advanced Technology Materials 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.