Correlation Between Tieling Newcity and Xinjiang Beixin

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Can any of the company-specific risk be diversified away by investing in both Tieling Newcity and Xinjiang Beixin 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 Tieling Newcity and Xinjiang Beixin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tieling Newcity Investment and Xinjiang Beixin RoadBridge, you can compare the effects of market volatilities on Tieling Newcity and Xinjiang Beixin 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 Tieling Newcity with a short position of Xinjiang Beixin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tieling Newcity and Xinjiang Beixin.

Diversification Opportunities for Tieling Newcity and Xinjiang Beixin

0.23
  Correlation Coefficient

Modest diversification

The 3 months correlation between Tieling and Xinjiang is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Tieling Newcity Investment and Xinjiang Beixin RoadBridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinjiang Beixin Road and Tieling Newcity 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 Tieling Newcity Investment are associated (or correlated) with Xinjiang Beixin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinjiang Beixin Road has no effect on the direction of Tieling Newcity i.e., Tieling Newcity and Xinjiang Beixin go up and down completely randomly.

Pair Corralation between Tieling Newcity and Xinjiang Beixin

Assuming the 90 days trading horizon Tieling Newcity Investment is expected to generate 0.84 times more return on investment than Xinjiang Beixin. However, Tieling Newcity Investment is 1.18 times less risky than Xinjiang Beixin. It trades about 0.17 of its potential returns per unit of risk. Xinjiang Beixin RoadBridge is currently generating about -0.09 per unit of risk. If you would invest  269.00  in Tieling Newcity Investment on October 16, 2024 and sell it today you would earn a total of  57.00  from holding Tieling Newcity Investment or generate 21.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Tieling Newcity Investment  vs.  Xinjiang Beixin RoadBridge

 Performance 
       Timeline  
Tieling Newcity Inve 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Tieling Newcity Investment are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tieling Newcity sustained solid returns over the last few months and may actually be approaching a breakup point.
Xinjiang Beixin Road 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Xinjiang Beixin RoadBridge has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Xinjiang Beixin is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tieling Newcity and Xinjiang Beixin Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Tieling Newcity and Xinjiang Beixin

The main advantage of trading using opposite Tieling Newcity and Xinjiang Beixin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tieling Newcity position performs unexpectedly, Xinjiang Beixin 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 Xinjiang Beixin will offset losses from the drop in Xinjiang Beixin's long position.
The idea behind Tieling Newcity Investment and Xinjiang Beixin RoadBridge 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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