Correlation Between Trio Tech and Xunlei

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

By analyzing existing cross correlation between Trio Tech International and Xunlei Ltd Adr, you can compare the effects of market volatilities on Trio Tech and Xunlei 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 Trio Tech with a short position of Xunlei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trio Tech and Xunlei.

Diversification Opportunities for Trio Tech and Xunlei

-0.34

Correlation Coefficient

Trio Tech  Xunlei

Very good diversification

The 3 months correlation between Trio and Xunlei is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Trio Tech International and Xunlei Ltd Adr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xunlei Ltd Adr and Trio Tech 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 Trio Tech International are associated (or correlated) with Xunlei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xunlei Ltd Adr has no effect on the direction of Trio Tech i.e., Trio Tech and Xunlei go up and down completely randomly.

Pair Corralation between Trio Tech and Xunlei

Considering the 90-day investment horizon Trio Tech International is expected to under-perform the Xunlei. But the stock apears to be less risky and, when comparing its historical volatility, Trio Tech International is 1.22 times less risky than Xunlei. The stock trades about -0.07 of its potential returns per unit of risk. The Xunlei Ltd Adr is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  204.00  in Xunlei Ltd Adr on October 25, 2024 and sell it today you would earn a total of  11.00  from holding Xunlei Ltd Adr or generate 5.39% return on investment over 90 days.

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

Trio Tech International  vs.  Xunlei Ltd Adr

Trio Tech International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trio Tech International 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 basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Xunlei Ltd Adr

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xunlei Ltd Adr are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, Xunlei may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Trio Tech and Xunlei

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

The idea behind Trio Tech International and Xunlei Ltd 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.