Correlation Between Xunlei and Alliance Recovery

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

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

Diversification Opportunities for Xunlei and Alliance Recovery

0.29

Correlation Coefficient

Xunlei  Alliance Recovery

Modest diversification

The 3 months correlation between Xunlei and Alliance is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Xunlei Ltd Adr and Alliance Recovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Recovery and Xunlei 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 Xunlei Ltd Adr are associated (or correlated) with Alliance Recovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Recovery has no effect on the direction of Xunlei i.e., Xunlei and Alliance Recovery go up and down completely randomly.

Pair Corralation between Xunlei and Alliance Recovery

Given the investment horizon of 90 days Xunlei Ltd Adr is expected to generate 0.53 times more return on investment than Alliance Recovery. However, Xunlei Ltd Adr is 1.89 times less risky than Alliance Recovery. It trades about 0.2 of its potential returns per unit of risk. Alliance Recovery is currently generating about 0.04 per unit of risk. If you would invest  214.00  in Xunlei Ltd Adr on December 2, 2024 and sell it today you would earn a total of  172.00  from holding Xunlei Ltd Adr or generate 80.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.85%
Values	Daily Returns

Xunlei Ltd Adr  vs.  Alliance Recovery

Xunlei Ltd Adr

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xunlei Ltd Adr are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, Xunlei unveiled solid returns over the last few months and may actually be approaching a breakup point.

Alliance Recovery

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Recovery are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Alliance Recovery showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xunlei and Alliance Recovery

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

The idea behind Xunlei Ltd Adr and Alliance Recovery 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.