Correlation Between NIPPON PROLOGIS and Xiaomi

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

By analyzing existing cross correlation between NIPPON PROLOGIS REIT and Xiaomi, you can compare the effects of market volatilities on NIPPON PROLOGIS and Xiaomi 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 NIPPON PROLOGIS with a short position of Xiaomi. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIPPON PROLOGIS and Xiaomi.

Diversification Opportunities for NIPPON PROLOGIS and Xiaomi

-0.77

Correlation Coefficient

NIPPON PROLOGIS  Xiaomi

Pay attention - limited upside

The 3 months correlation between NIPPON and Xiaomi is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding NIPPON PROLOGIS REIT and Xiaomi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiaomi and NIPPON PROLOGIS 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 NIPPON PROLOGIS REIT are associated (or correlated) with Xiaomi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiaomi has no effect on the direction of NIPPON PROLOGIS i.e., NIPPON PROLOGIS and Xiaomi go up and down completely randomly.

Pair Corralation between NIPPON PROLOGIS and Xiaomi

Assuming the 90 days trading horizon NIPPON PROLOGIS REIT is expected to under-perform the Xiaomi. But the stock apears to be less risky and, when comparing its historical volatility, NIPPON PROLOGIS REIT is 2.38 times less risky than Xiaomi. The stock trades about -0.03 of its potential returns per unit of risk. The Xiaomi is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  222.00  in Xiaomi on August 31, 2024 and sell it today you would earn a total of  115.00  from holding Xiaomi or generate 51.8% return on investment over 90 days.

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

NIPPON PROLOGIS REIT  vs.  Xiaomi

NIPPON PROLOGIS REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NIPPON PROLOGIS REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NIPPON PROLOGIS is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Xiaomi

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xiaomi are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Xiaomi reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NIPPON PROLOGIS and Xiaomi

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

The idea behind NIPPON PROLOGIS REIT and Xiaomi 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.