Correlation Between Xiangtan Electrochemical and Xinjiang Communications

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

Diversification Opportunities for Xiangtan Electrochemical and Xinjiang Communications

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between Xiangtan and Xinjiang is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Xiangtan Electrochemical Scien and Xinjiang Communications Constr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinjiang Communications and Xiangtan Electrochemical 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 Xiangtan Electrochemical Scientific are associated (or correlated) with Xinjiang Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinjiang Communications has no effect on the direction of Xiangtan Electrochemical i.e., Xiangtan Electrochemical and Xinjiang Communications go up and down completely randomly.

Pair Corralation between Xiangtan Electrochemical and Xinjiang Communications

Assuming the 90 days trading horizon Xiangtan Electrochemical Scientific is expected to under-perform the Xinjiang Communications. But the stock apears to be less risky and, when comparing its historical volatility, Xiangtan Electrochemical Scientific is 1.13 times less risky than Xinjiang Communications. The stock trades about -0.02 of its potential returns per unit of risk. The Xinjiang Communications Construction is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,279  in Xinjiang Communications Construction on October 20, 2024 and sell it today you would lose (199.00) from holding Xinjiang Communications Construction or give up 15.56% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Xiangtan Electrochemical Scien  vs.  Xinjiang Communications Constr

 Performance 
       Timeline  
Xiangtan Electrochemical 

Risk-Adjusted Performance

2 of 100

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

Risk-Adjusted Performance

0 of 100

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

Xiangtan Electrochemical and Xinjiang Communications Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Xiangtan Electrochemical and Xinjiang Communications

The main advantage of trading using opposite Xiangtan Electrochemical and Xinjiang Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xiangtan Electrochemical position performs unexpectedly, Xinjiang Communications 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 Communications will offset losses from the drop in Xinjiang Communications' long position.
The idea behind Xiangtan Electrochemical Scientific and Xinjiang Communications Construction 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 Commodity Directory module to find actively traded commodities issued by global exchanges.

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