Correlation Between Xiamen Bank and Chengdu Spaceon

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

Diversification Opportunities for Xiamen Bank and Chengdu Spaceon

0.19
  Correlation Coefficient

Average diversification

The 3 months correlation between Xiamen and Chengdu is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Xiamen Bank Co and Chengdu Spaceon Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chengdu Spaceon Elec and Xiamen Bank 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 Xiamen Bank Co are associated (or correlated) with Chengdu Spaceon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chengdu Spaceon Elec has no effect on the direction of Xiamen Bank i.e., Xiamen Bank and Chengdu Spaceon go up and down completely randomly.

Pair Corralation between Xiamen Bank and Chengdu Spaceon

Assuming the 90 days trading horizon Xiamen Bank Co is expected to generate 0.51 times more return on investment than Chengdu Spaceon. However, Xiamen Bank Co is 1.96 times less risky than Chengdu Spaceon. It trades about 0.01 of its potential returns per unit of risk. Chengdu Spaceon Electronics is currently generating about 0.0 per unit of risk. If you would invest  506.00  in Xiamen Bank Co on October 16, 2024 and sell it today you would earn a total of  14.00  from holding Xiamen Bank Co or generate 2.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Xiamen Bank Co  vs.  Chengdu Spaceon Electronics

 Performance 
       Timeline  
Xiamen Bank 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Xiamen Bank Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Xiamen Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Chengdu Spaceon Elec 

Risk-Adjusted Performance

0 of 100

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

Xiamen Bank and Chengdu Spaceon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Xiamen Bank and Chengdu Spaceon

The main advantage of trading using opposite Xiamen Bank and Chengdu Spaceon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xiamen Bank position performs unexpectedly, Chengdu Spaceon 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 Chengdu Spaceon will offset losses from the drop in Chengdu Spaceon's long position.
The idea behind Xiamen Bank Co and Chengdu Spaceon Electronics 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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