Correlation Between Transcontinental and Xinyuan Real

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

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

Diversification Opportunities for Transcontinental and Xinyuan Real

-0.49

Correlation Coefficient

Transcontinental  Xinyuan Real

Very good diversification

The 3 months correlation between Transcontinental and Xinyuan is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Transcontinental Realty Invest 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 Transcontinental 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 Transcontinental Realty Investors 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 Transcontinental i.e., Transcontinental and Xinyuan Real go up and down completely randomly.

Pair Corralation between Transcontinental and Xinyuan Real

Considering the 90-day investment horizon Transcontinental is expected to generate 1.49 times less return on investment than Xinyuan Real. But when comparing it to its historical volatility, Transcontinental Realty Investors is 1.93 times less risky than Xinyuan Real. It trades about 0.03 of its potential returns per unit of risk. Xinyuan Real Estate is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  283.00  in Xinyuan Real Estate on October 6, 2024 and sell it today you would lose (1.00) from holding Xinyuan Real Estate or give up 0.35% of portfolio value over 90 days.

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

Transcontinental Realty Invest  vs.  Xinyuan Real Estate

Transcontinental Realty

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Transcontinental Realty Investors are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent fundamental indicators, Transcontinental may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 Transcontinental and Xinyuan Real

The main advantage of trading using opposite Transcontinental and Xinyuan Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transcontinental 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 Transcontinental Realty Investors 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.