Correlation Between RMR and Xinyuan Real

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

By analyzing existing cross correlation between RMR Group and Xinyuan Real Estate, you can compare the effects of market volatilities on RMR and Xinyuan Real 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 RMR with a short position of Xinyuan Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of RMR and Xinyuan Real.

Diversification Opportunities for RMR and Xinyuan Real

0.87

Correlation Coefficient

RMR  Xinyuan Real

Very poor diversification

The 3 months correlation between RMR and Xinyuan is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding RMR Group and Xinyuan Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinyuan Real Estate and RMR 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 RMR Group are associated (or correlated) with Xinyuan Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinyuan Real Estate has no effect on the direction of RMR i.e., RMR and Xinyuan Real go up and down completely randomly.

Pair Corralation between RMR and Xinyuan Real

Considering the 90-day investment horizon RMR Group is expected to under-perform the Xinyuan Real. But the stock apears to be less risky and, when comparing its historical volatility, RMR Group is 3.49 times less risky than Xinyuan Real. The stock trades about -0.11 of its potential returns per unit of risk. The Xinyuan Real Estate is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  237.00  in Xinyuan Real Estate on October 23, 2024 and sell it today you would earn a total of  45.00  from holding Xinyuan Real Estate or generate 18.99% return on investment over 90 days.

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

RMR Group  vs.  Xinyuan Real Estate

RMR Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RMR Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's primary indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Xinyuan Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xinyuan Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with RMR and Xinyuan Real

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

The idea behind RMR Group and Xinyuan Real Estate 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.