Correlation Between Xiaomi Corp and MARATHON

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

By analyzing existing cross correlation between Xiaomi Corp and MARATHON PETE P, you can compare the effects of market volatilities on Xiaomi Corp and MARATHON 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 MARATHON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiaomi Corp and MARATHON.

Diversification Opportunities for Xiaomi Corp and MARATHON

-0.09

Correlation Coefficient

Xiaomi Corp  MARATHON

Good diversification

The 3 months correlation between Xiaomi and MARATHON is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Xiaomi Corp and MARATHON PETE P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MARATHON PETE P 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 MARATHON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MARATHON PETE P has no effect on the direction of Xiaomi Corp i.e., Xiaomi Corp and MARATHON go up and down completely randomly.

Pair Corralation between Xiaomi Corp and MARATHON

Assuming the 90 days horizon Xiaomi Corp is expected to generate 1.26 times more return on investment than MARATHON. However, Xiaomi Corp is 1.26 times more volatile than MARATHON PETE P. It trades about 0.17 of its potential returns per unit of risk. MARATHON PETE P is currently generating about 0.07 per unit of risk. If you would invest  400.00  in Xiaomi Corp on October 11, 2024 and sell it today you would earn a total of  40.00  from holding Xiaomi Corp or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Xiaomi Corp  vs.  MARATHON PETE P

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.

MARATHON PETE P

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MARATHON PETE P are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, MARATHON is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Xiaomi Corp and MARATHON

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

The idea behind Xiaomi Corp and MARATHON PETE P 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.