Correlation Between China World and Xinya Electronic
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By analyzing existing cross correlation between China World Trade and Xinya Electronic Co, you can compare the effects of market volatilities on China World and Xinya Electronic 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 China World with a short position of Xinya Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of China World and Xinya Electronic.
Diversification Opportunities for China World and Xinya Electronic
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Xinya is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding China World Trade and Xinya Electronic Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinya Electronic and China World 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 China World Trade are associated (or correlated) with Xinya Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinya Electronic has no effect on the direction of China World i.e., China World and Xinya Electronic go up and down completely randomly.
Pair Corralation between China World and Xinya Electronic
Assuming the 90 days trading horizon China World is expected to generate 5.21 times less return on investment than Xinya Electronic. But when comparing it to its historical volatility, China World Trade is 4.29 times less risky than Xinya Electronic. It trades about 0.22 of its potential returns per unit of risk. Xinya Electronic Co is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 1,443 in Xinya Electronic Co on November 7, 2024 and sell it today you would earn a total of 352.00 from holding Xinya Electronic Co or generate 24.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China World Trade vs. Xinya Electronic Co
Performance |
| Timeline |
| China World Trade |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
| Xinya Electronic |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
China World and Xinya Electronic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China World and Xinya Electronic
The main advantage of trading using opposite China World and Xinya Electronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China World position performs unexpectedly, Xinya Electronic 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 Xinya Electronic will offset losses from the drop in Xinya Electronic's long position.The idea behind China World Trade and Xinya Electronic Co 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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