Correlation Between Xinjiang Communications and Shaanxi Construction
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By analyzing existing cross correlation between Xinjiang Communications Construction and Shaanxi Construction Machinery, you can compare the effects of market volatilities on Xinjiang Communications and Shaanxi Construction 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 Xinjiang Communications with a short position of Shaanxi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinjiang Communications and Shaanxi Construction.
Diversification Opportunities for Xinjiang Communications and Shaanxi Construction
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Xinjiang and Shaanxi is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Xinjiang Communications Constr and Shaanxi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaanxi Construction and Xinjiang Communications 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 Xinjiang Communications Construction are associated (or correlated) with Shaanxi Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaanxi Construction has no effect on the direction of Xinjiang Communications i.e., Xinjiang Communications and Shaanxi Construction go up and down completely randomly.
Pair Corralation between Xinjiang Communications and Shaanxi Construction
Assuming the 90 days trading horizon Xinjiang Communications Construction is expected to generate 0.57 times more return on investment than Shaanxi Construction. However, Xinjiang Communications Construction is 1.74 times less risky than Shaanxi Construction. It trades about -0.15 of its potential returns per unit of risk. Shaanxi Construction Machinery is currently generating about -0.09 per unit of risk. If you would invest 1,296 in Xinjiang Communications Construction on November 6, 2024 and sell it today you would lose (223.00) from holding Xinjiang Communications Construction or give up 17.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xinjiang Communications Constr vs. Shaanxi Construction Machinery
Performance |
| Timeline |
| Xinjiang Communications |
| Shaanxi Construction |
Xinjiang Communications and Shaanxi Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xinjiang Communications and Shaanxi Construction
The main advantage of trading using opposite Xinjiang Communications and Shaanxi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xinjiang Communications position performs unexpectedly, Shaanxi Construction 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 Shaanxi Construction will offset losses from the drop in Shaanxi Construction's long position.The idea behind Xinjiang Communications Construction and Shaanxi Construction Machinery 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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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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