Correlation Between Xinjiang Baodi and CNPC Capital

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

Diversification Opportunities for Xinjiang Baodi and CNPC Capital

-0.68
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Xinjiang and CNPC is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Xinjiang Baodi Mining and CNPC Capital Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNPC Capital and Xinjiang Baodi 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 Baodi Mining are associated (or correlated) with CNPC Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNPC Capital has no effect on the direction of Xinjiang Baodi i.e., Xinjiang Baodi and CNPC Capital go up and down completely randomly.

Pair Corralation between Xinjiang Baodi and CNPC Capital

Assuming the 90 days trading horizon Xinjiang Baodi is expected to generate 1.41 times less return on investment than CNPC Capital. But when comparing it to its historical volatility, Xinjiang Baodi Mining is 1.02 times less risky than CNPC Capital. It trades about 0.02 of its potential returns per unit of risk. CNPC Capital Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  574.00  in CNPC Capital Co on October 16, 2024 and sell it today you would earn a total of  70.00  from holding CNPC Capital Co or generate 12.2% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy93.93%
ValuesDaily Returns

Xinjiang Baodi Mining  vs.  CNPC Capital Co

 Performance 
       Timeline  
Xinjiang Baodi Mining 

Risk-Adjusted Performance

2 of 100

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

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CNPC Capital Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Xinjiang Baodi and CNPC Capital Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Xinjiang Baodi and CNPC Capital

The main advantage of trading using opposite Xinjiang Baodi and CNPC Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xinjiang Baodi position performs unexpectedly, CNPC Capital 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 CNPC Capital will offset losses from the drop in CNPC Capital's long position.
The idea behind Xinjiang Baodi Mining and CNPC Capital 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.
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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 Channel module to use Commodity Channel Index to analyze current equity momentum.

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