Correlation Between China Yuchai and Xylem
Can any of the company-specific risk be diversified away by investing in both China Yuchai and Xylem 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 China Yuchai and Xylem into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Yuchai International and Xylem Inc, you can compare the effects of market volatilities on China Yuchai and Xylem 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 Yuchai with a short position of Xylem. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Yuchai and Xylem.
Diversification Opportunities for China Yuchai and Xylem
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Xylem is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding China Yuchai International and Xylem Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xylem Inc and China Yuchai 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 Yuchai International are associated (or correlated) with Xylem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xylem Inc has no effect on the direction of China Yuchai i.e., China Yuchai and Xylem go up and down completely randomly.
Pair Corralation between China Yuchai and Xylem
Considering the 90-day investment horizon China Yuchai is expected to generate 1.38 times less return on investment than Xylem. In addition to that, China Yuchai is 1.59 times more volatile than Xylem Inc. It trades about 0.02 of its total potential returns per unit of risk. Xylem Inc is currently generating about 0.04 per unit of volatility. If you would invest 10,188 in Xylem Inc on August 27, 2024 and sell it today you would earn a total of 2,499 from holding Xylem Inc or generate 24.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Yuchai International vs. Xylem Inc
Performance |
| Timeline |
| China Yuchai Interna |
| Xylem Inc |
China Yuchai and Xylem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Yuchai and Xylem
The main advantage of trading using opposite China Yuchai and Xylem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Yuchai position performs unexpectedly, Xylem 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 Xylem will offset losses from the drop in Xylem's long position.| China Yuchai vs. China Automotive Systems | China Yuchai vs. China Natural Resources | China Yuchai vs. Sonida Senior Living | China Yuchai vs. UTStarcom Holdings Corp |
| Xylem vs. Aquagold International | Xylem vs. Morningstar Unconstrained Allocation | Xylem vs. High Yield Municipal Fund | Xylem vs. Thrivent High Yield |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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