Correlation Between Xinyuan Real and Transcontinental

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

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

Diversification Opportunities for Xinyuan Real and Transcontinental

-0.49

Correlation Coefficient

Xinyuan Real  Transcontinental

Very good diversification

The 3 months correlation between Xinyuan and Transcontinental is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Xinyuan Real Estate and Transcontinental Realty Invest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcontinental Realty and Xinyuan Real 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 Xinyuan Real Estate are associated (or correlated) with Transcontinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcontinental Realty has no effect on the direction of Xinyuan Real i.e., Xinyuan Real and Transcontinental go up and down completely randomly.

Pair Corralation between Xinyuan Real and Transcontinental

Considering the 90-day investment horizon Xinyuan Real Estate is expected to generate 1.93 times more return on investment than Transcontinental. However, Xinyuan Real is 1.93 times more volatile than Transcontinental Realty Investors. It trades about 0.02 of its potential returns per unit of risk. Transcontinental Realty Investors is currently generating about 0.03 per unit of risk. 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

Xinyuan Real Estate  vs.  Transcontinental Realty Invest

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.

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.

Pair Trading with Xinyuan Real and Transcontinental

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

The idea behind Xinyuan Real Estate and Transcontinental Realty Investors 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.