Correlation Between Sharp Corp and Xiaomi Corp

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

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

Diversification Opportunities for Sharp Corp and Xiaomi Corp

-0.28

Correlation Coefficient

Sharp Corp  Xiaomi Corp

Very good diversification

The 3 months correlation between Sharp and Xiaomi is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Sharp Corp ADR and Xiaomi Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiaomi Corp ADR and Sharp Corp 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 Sharp Corp ADR are associated (or correlated) with Xiaomi Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiaomi Corp ADR has no effect on the direction of Sharp Corp i.e., Sharp Corp and Xiaomi Corp go up and down completely randomly.

Pair Corralation between Sharp Corp and Xiaomi Corp

Assuming the 90 days horizon Sharp Corp ADR is expected to under-perform the Xiaomi Corp. In addition to that, Sharp Corp is 1.37 times more volatile than Xiaomi Corp ADR. It trades about -0.04 of its total potential returns per unit of risk. Xiaomi Corp ADR is currently generating about 0.2 per unit of volatility. If you would invest  1,480  in Xiaomi Corp ADR on October 15, 2024 and sell it today you would earn a total of  612.00  from holding Xiaomi Corp ADR or generate 41.35% return on investment over 90 days.

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

Sharp Corp ADR  vs.  Xiaomi Corp ADR

Sharp Corp ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sharp Corp ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Xiaomi Corp ADR

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xiaomi Corp ADR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Xiaomi Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sharp Corp and Xiaomi Corp

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

The idea behind Sharp Corp ADR and Xiaomi Corp ADR 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.