Correlation Between Xiangyu Medical and Hunan Oil

Can any of the company-specific risk be diversified away by investing in both Xiangyu Medical and Hunan Oil 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 Xiangyu Medical and Hunan Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xiangyu Medical Co and Hunan Oil Pump, you can compare the effects of market volatilities on Xiangyu Medical and Hunan Oil 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 Xiangyu Medical with a short position of Hunan Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiangyu Medical and Hunan Oil.

Diversification Opportunities for Xiangyu Medical and Hunan Oil

0.89

Correlation Coefficient

Xiangyu Medical  Hunan Oil

Very poor diversification

The 3 months correlation between Xiangyu and Hunan is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Xiangyu Medical Co and Hunan Oil Pump in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hunan Oil Pump and Xiangyu Medical 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 Xiangyu Medical Co are associated (or correlated) with Hunan Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hunan Oil Pump has no effect on the direction of Xiangyu Medical i.e., Xiangyu Medical and Hunan Oil go up and down completely randomly.

Pair Corralation between Xiangyu Medical and Hunan Oil

Assuming the 90 days trading horizon Xiangyu Medical is expected to generate 2.74 times less return on investment than Hunan Oil. But when comparing it to its historical volatility, Xiangyu Medical Co is 1.45 times less risky than Hunan Oil. It trades about 0.09 of its potential returns per unit of risk. Hunan Oil Pump is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,220  in Hunan Oil Pump on December 26, 2024 and sell it today you would earn a total of  1,152  from holding Hunan Oil Pump or generate 51.89% return on investment over 90 days.

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

Xiangyu Medical Co  vs.  Hunan Oil Pump

Xiangyu Medical

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xiangyu Medical Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiangyu Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Hunan Oil Pump

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Oil Pump are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Oil sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xiangyu Medical and Hunan Oil

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

The idea behind Xiangyu Medical Co and Hunan Oil Pump 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.