Correlation Between Xiaomi and Panasonic Corp
Can any of the company-specific risk be diversified away by investing in both Xiaomi and Panasonic Corp 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 Xiaomi and Panasonic Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xiaomi and Panasonic Corp, you can compare the effects of market volatilities on Xiaomi and Panasonic Corp 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 Xiaomi with a short position of Panasonic Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiaomi and Panasonic Corp.
Diversification Opportunities for Xiaomi and Panasonic Corp
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Xiaomi and Panasonic is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Xiaomi and Panasonic Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Panasonic Corp and Xiaomi 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 Xiaomi are associated (or correlated) with Panasonic Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Panasonic Corp has no effect on the direction of Xiaomi i.e., Xiaomi and Panasonic Corp go up and down completely randomly.
Pair Corralation between Xiaomi and Panasonic Corp
Assuming the 90 days horizon Xiaomi is expected to generate 1.28 times more return on investment than Panasonic Corp. However, Xiaomi is 1.28 times more volatile than Panasonic Corp. It trades about 0.08 of its potential returns per unit of risk. Panasonic Corp is currently generating about 0.02 per unit of risk. If you would invest 135.00 in Xiaomi on September 4, 2024 and sell it today you would earn a total of 218.00 from holding Xiaomi or generate 161.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xiaomi vs. Panasonic Corp
Performance |
| Timeline |
| Xiaomi |
| Panasonic Corp |
Xiaomi and Panasonic Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xiaomi and Panasonic Corp
The main advantage of trading using opposite Xiaomi and Panasonic Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xiaomi position performs unexpectedly, Panasonic Corp 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 Panasonic Corp will offset losses from the drop in Panasonic Corp's long position.The idea behind Xiaomi and Panasonic Corp 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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