Correlation Between DATATEC and Xiwang Special

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

By analyzing existing cross correlation between DATATEC LTD 2 and Xiwang Special Steel, you can compare the effects of market volatilities on DATATEC and Xiwang Special 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 DATATEC with a short position of Xiwang Special. Check out your portfolio center. Please also check ongoing floating volatility patterns of DATATEC and Xiwang Special.

Diversification Opportunities for DATATEC and Xiwang Special

0.0

Correlation Coefficient

DATATEC  Xiwang Special

Pay attention - limited upside

The 3 months correlation between DATATEC and Xiwang is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding DATATEC LTD 2 and Xiwang Special Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiwang Special Steel and DATATEC 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 DATATEC LTD 2 are associated (or correlated) with Xiwang Special. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiwang Special Steel has no effect on the direction of DATATEC i.e., DATATEC and Xiwang Special go up and down completely randomly.

Pair Corralation between DATATEC and Xiwang Special

Assuming the 90 days trading horizon DATATEC is expected to generate 61.68 times less return on investment than Xiwang Special. But when comparing it to its historical volatility, DATATEC LTD 2 is 34.83 times less risky than Xiwang Special. It trades about 0.05 of its potential returns per unit of risk. Xiwang Special Steel is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1.17  in Xiwang Special Steel on October 11, 2024 and sell it today you would lose (1.16) from holding Xiwang Special Steel or give up 99.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

DATATEC LTD 2  vs.  Xiwang Special Steel

DATATEC LTD 2

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DATATEC LTD 2 are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DATATEC reported solid returns over the last few months and may actually be approaching a breakup point.

Xiwang Special Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with DATATEC and Xiwang Special

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

The idea behind DATATEC LTD 2 and Xiwang Special Steel 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.