Correlation Between Xinhua Winshare and Geely Automobile

Can any of the company-specific risk be diversified away by investing in both Xinhua Winshare and Geely Automobile 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 Geely Automobile 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 Geely Automobile Holdings, you can compare the effects of market volatilities on Xinhua Winshare and Geely Automobile 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 Geely Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinhua Winshare and Geely Automobile.

Diversification Opportunities for Xinhua Winshare and Geely Automobile

0.75

Correlation Coefficient

Xinhua Winshare  Geely Automobile

Poor diversification

The 3 months correlation between Xinhua and Geely is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Xinhua Winshare Publishing and Geely Automobile Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geely Automobile Holdings 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 Geely Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geely Automobile Holdings has no effect on the direction of Xinhua Winshare i.e., Xinhua Winshare and Geely Automobile go up and down completely randomly.

Pair Corralation between Xinhua Winshare and Geely Automobile

Assuming the 90 days horizon Xinhua Winshare Publishing is expected to generate 1.51 times more return on investment than Geely Automobile. However, Xinhua Winshare is 1.51 times more volatile than Geely Automobile Holdings. It trades about 0.13 of its potential returns per unit of risk. Geely Automobile Holdings is currently generating about 0.13 per unit of risk. If you would invest  50.00  in Xinhua Winshare Publishing on October 12, 2024 and sell it today you would earn a total of  89.00  from holding Xinhua Winshare Publishing or generate 178.0% return on investment over 90 days.

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

Xinhua Winshare Publishing  vs.  Geely Automobile Holdings

Xinhua Winshare Publ

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xinhua Winshare Publishing are ranked lower than 15 (%) 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.

Geely Automobile Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Geely Automobile Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Geely Automobile reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xinhua Winshare and Geely Automobile

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

The idea behind Xinhua Winshare Publishing and Geely Automobile Holdings 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 Stocks Directory module to find actively traded stocks across global markets.