Correlation Between Xinhua Winshare and CHINA EDUCATION

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

By analyzing existing cross correlation between Xinhua Winshare Publishing and CHINA EDUCATION GROUP, you can compare the effects of market volatilities on Xinhua Winshare and CHINA EDUCATION 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 Xinhua Winshare with a short position of CHINA EDUCATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinhua Winshare and CHINA EDUCATION.

Diversification Opportunities for Xinhua Winshare and CHINA EDUCATION

-0.32

Correlation Coefficient

Xinhua Winshare  CHINA EDUCATION

Very good diversification

The 3 months correlation between Xinhua and CHINA is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Xinhua Winshare Publishing and CHINA EDUCATION GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA EDUCATION GROUP and Xinhua Winshare 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 Xinhua Winshare Publishing are associated (or correlated) with CHINA EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA EDUCATION GROUP has no effect on the direction of Xinhua Winshare i.e., Xinhua Winshare and CHINA EDUCATION go up and down completely randomly.

Pair Corralation between Xinhua Winshare and CHINA EDUCATION

Assuming the 90 days horizon Xinhua Winshare Publishing is expected to generate 0.64 times more return on investment than CHINA EDUCATION. However, Xinhua Winshare Publishing is 1.55 times less risky than CHINA EDUCATION. It trades about 0.21 of its potential returns per unit of risk. CHINA EDUCATION GROUP is currently generating about -0.02 per unit of risk. If you would invest  86.00  in Xinhua Winshare Publishing on September 15, 2024 and sell it today you would earn a total of  41.00  from holding Xinhua Winshare Publishing or generate 47.67% return on investment over 90 days.

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

Xinhua Winshare Publishing  vs.  CHINA EDUCATION GROUP

Xinhua Winshare Publ

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xinhua Winshare Publishing are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Xinhua Winshare reported solid returns over the last few months and may actually be approaching a breakup point.

CHINA EDUCATION GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Xinhua Winshare and CHINA EDUCATION

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

The idea behind Xinhua Winshare Publishing and CHINA EDUCATION GROUP 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.