Correlation Between Hong Yuan and XCana Petroleum

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

By analyzing existing cross correlation between Hong Yuan Holding and XCana Petroleum, you can compare the effects of market volatilities on Hong Yuan and XCana Petroleum 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 Hong Yuan with a short position of XCana Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Yuan and XCana Petroleum.

Diversification Opportunities for Hong Yuan and XCana Petroleum

-0.16

Correlation Coefficient

Hong Yuan  XCana Petroleum

Good diversification

The 3 months correlation between Hong and XCana is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Hong Yuan Holding and XCana Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XCana Petroleum and Hong Yuan 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 Hong Yuan Holding are associated (or correlated) with XCana Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XCana Petroleum has no effect on the direction of Hong Yuan i.e., Hong Yuan and XCana Petroleum go up and down completely randomly.

Pair Corralation between Hong Yuan and XCana Petroleum

Given the investment horizon of 90 days Hong Yuan Holding is expected to generate 0.86 times more return on investment than XCana Petroleum. However, Hong Yuan Holding is 1.16 times less risky than XCana Petroleum. It trades about 0.19 of its potential returns per unit of risk. XCana Petroleum is currently generating about 0.15 per unit of risk. If you would invest  3.70  in Hong Yuan Holding on October 23, 2024 and sell it today you would earn a total of  1.28  from holding Hong Yuan Holding or generate 34.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Hong Yuan Holding  vs.  XCana Petroleum

Hong Yuan Holding

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hong Yuan Holding are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Hong Yuan displayed solid returns over the last few months and may actually be approaching a breakup point.

XCana Petroleum

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in XCana Petroleum are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, XCana Petroleum unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hong Yuan and XCana Petroleum

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

The idea behind Hong Yuan Holding and XCana Petroleum 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.