Correlation Between Plug Power and Xiaomi
Can any of the company-specific risk be diversified away by investing in both Plug Power and Xiaomi 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 Plug Power and Xiaomi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Plug Power and Xiaomi, you can compare the effects of market volatilities on Plug Power and Xiaomi 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 Plug Power with a short position of Xiaomi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plug Power and Xiaomi.
Diversification Opportunities for Plug Power and Xiaomi
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Plug and Xiaomi is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Plug Power and Xiaomi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiaomi and Plug Power 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 Plug Power are associated (or correlated) with Xiaomi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiaomi has no effect on the direction of Plug Power i.e., Plug Power and Xiaomi go up and down completely randomly.
Pair Corralation between Plug Power and Xiaomi
Assuming the 90 days trading horizon Plug Power is expected to under-perform the Xiaomi. In addition to that, Plug Power is 2.14 times more volatile than Xiaomi. It trades about -0.11 of its total potential returns per unit of risk. Xiaomi is currently generating about 0.25 per unit of volatility. If you would invest 429.00 in Xiaomi on November 2, 2024 and sell it today you would earn a total of 76.00 from holding Xiaomi or generate 17.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Plug Power vs. Xiaomi
Performance |
| Timeline |
| Plug Power |
| Xiaomi |
Plug Power and Xiaomi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Plug Power and Xiaomi
The main advantage of trading using opposite Plug Power and Xiaomi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plug Power position performs unexpectedly, Xiaomi 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 Xiaomi will offset losses from the drop in Xiaomi's long position.| Plug Power vs. Hon Hai Precision | Plug Power vs. Samsung SDI Co | Plug Power vs. Corning Incorporated | Plug Power vs. Mitsubishi Electric |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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