Correlation Between TGI Solar and Xinyi Solar

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

By analyzing existing cross correlation between TGI Solar Power and Xinyi Solar Holdings, you can compare the effects of market volatilities on TGI Solar and Xinyi Solar 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 TGI Solar with a short position of Xinyi Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of TGI Solar and Xinyi Solar.

Diversification Opportunities for TGI Solar and Xinyi Solar

0.4

Correlation Coefficient

TGI Solar  Xinyi Solar

Very weak diversification

The 3 months correlation between TGI and Xinyi is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding TGI Solar Power and Xinyi Solar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinyi Solar Holdings and TGI Solar 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 TGI Solar Power are associated (or correlated) with Xinyi Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinyi Solar Holdings has no effect on the direction of TGI Solar i.e., TGI Solar and Xinyi Solar go up and down completely randomly.

Pair Corralation between TGI Solar and Xinyi Solar

Given the investment horizon of 90 days TGI Solar Power is expected to generate 4.1 times more return on investment than Xinyi Solar. However, TGI Solar is 4.1 times more volatile than Xinyi Solar Holdings. It trades about 0.13 of its potential returns per unit of risk. Xinyi Solar Holdings is currently generating about 0.07 per unit of risk. If you would invest  0.07  in TGI Solar Power on December 19, 2024 and sell it today you would earn a total of  0.05  from holding TGI Solar Power or generate 71.43% return on investment over 90 days.

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

TGI Solar Power  vs.  Xinyi Solar Holdings

TGI Solar Power

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TGI Solar Power are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, TGI Solar reported solid returns over the last few months and may actually be approaching a breakup point.

Xinyi Solar Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xinyi Solar Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical indicators, Xinyi Solar showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TGI Solar and Xinyi Solar

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

The idea behind TGI Solar Power and Xinyi Solar 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.