Correlation Between Snap On and Xiaomi Corp

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

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

Diversification Opportunities for Snap On and Xiaomi Corp

-0.48

Correlation Coefficient

Snap On  Xiaomi Corp

Very good diversification

The 3 months correlation between Snap and Xiaomi is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Snap On and Xiaomi Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiaomi Corp and Snap On 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 Snap On 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 has no effect on the direction of Snap On i.e., Snap On and Xiaomi Corp go up and down completely randomly.

Pair Corralation between Snap On and Xiaomi Corp

Considering the 90-day investment horizon Snap On is expected to under-perform the Xiaomi Corp. But the stock apears to be less risky and, when comparing its historical volatility, Snap On is 3.08 times less risky than Xiaomi Corp. The stock trades about -0.02 of its potential returns per unit of risk. The Xiaomi Corp is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  396.00  in Xiaomi Corp on December 19, 2024 and sell it today you would earn a total of  351.00  from holding Xiaomi Corp or generate 88.64% return on investment over 90 days.

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

Snap On  vs.  Xiaomi Corp

Snap On

Risk-Adjusted Performance

Very Weak

Over the last 90 days Snap On has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Snap On is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Xiaomi Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xiaomi Corp are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Xiaomi Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Snap On and Xiaomi Corp

The main advantage of trading using opposite Snap On and Xiaomi Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap On 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 Snap On and Xiaomi Corp 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.