Correlation Between Xiaomi Corp and Palo Alto

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

By analyzing existing cross correlation between Xiaomi Corp and Palo Alto Networks, you can compare the effects of market volatilities on Xiaomi Corp and Palo Alto 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 Xiaomi Corp with a short position of Palo Alto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiaomi Corp and Palo Alto.

Diversification Opportunities for Xiaomi Corp and Palo Alto

-0.32

Correlation Coefficient

Xiaomi Corp  Palo Alto

Very good diversification

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

Pair Corralation between Xiaomi Corp and Palo Alto

Assuming the 90 days horizon Xiaomi Corp is expected to generate 1.49 times more return on investment than Palo Alto. However, Xiaomi Corp is 1.49 times more volatile than Palo Alto Networks. It trades about 0.23 of its potential returns per unit of risk. Palo Alto Networks is currently generating about -0.02 per unit of risk. If you would invest  324.00  in Xiaomi Corp on October 24, 2024 and sell it today you would earn a total of  137.00  from holding Xiaomi Corp or generate 42.28% return on investment over 90 days.

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

Xiaomi Corp  vs.  Palo Alto Networks

Xiaomi Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xiaomi Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Xiaomi Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Palo Alto Networks

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Palo Alto Networks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Palo Alto is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Xiaomi Corp and Palo Alto

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

The idea behind Xiaomi Corp and Palo Alto Networks 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.