Correlation Between Xunlei and MidCap Financial

Can any of the company-specific risk be diversified away by investing in both Xunlei and MidCap Financial 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 MidCap Financial 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 MidCap Financial Investment, you can compare the effects of market volatilities on Xunlei and MidCap Financial 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 MidCap Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xunlei and MidCap Financial.

Diversification Opportunities for Xunlei and MidCap Financial

0.13

Correlation Coefficient

Xunlei  MidCap Financial

Average diversification

The 3 months correlation between Xunlei and MidCap is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Xunlei Ltd Adr and MidCap Financial Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MidCap Financial Inv 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 MidCap Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MidCap Financial Inv has no effect on the direction of Xunlei i.e., Xunlei and MidCap Financial go up and down completely randomly.

Pair Corralation between Xunlei and MidCap Financial

Given the investment horizon of 90 days Xunlei Ltd Adr is expected to generate 11.21 times more return on investment than MidCap Financial. However, Xunlei is 11.21 times more volatile than MidCap Financial Investment. It trades about 0.02 of its potential returns per unit of risk. MidCap Financial Investment is currently generating about 0.11 per unit of risk. If you would invest  204.00  in Xunlei Ltd Adr on October 26, 2024 and sell it today you would earn a total of  31.00  from holding Xunlei Ltd Adr or generate 15.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	55.67%
Values	Daily Returns

Xunlei Ltd Adr  vs.  MidCap Financial Investment

Xunlei Ltd Adr

Risk-Adjusted Performance

5 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xunlei Ltd Adr are ranked lower than 5 (%) 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.

MidCap Financial Inv

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MidCap Financial Investment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, MidCap Financial is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Xunlei and MidCap Financial

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

The idea behind Xunlei Ltd Adr and MidCap Financial Investment 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.