Correlation Between Textron and Xiaomi
Can any of the company-specific risk be diversified away by investing in both Textron 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 Textron and Xiaomi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Textron and Xiaomi, you can compare the effects of market volatilities on Textron 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 Textron with a short position of Xiaomi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Textron and Xiaomi.
Diversification Opportunities for Textron and Xiaomi
Very good diversification
The 3 months correlation between Textron and Xiaomi is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Textron and Xiaomi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiaomi and Textron 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 Textron 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 Textron i.e., Textron and Xiaomi go up and down completely randomly.
Pair Corralation between Textron and Xiaomi
Assuming the 90 days trading horizon Textron is expected to generate 16.11 times less return on investment than Xiaomi. But when comparing it to its historical volatility, Textron is 2.72 times less risky than Xiaomi. It trades about 0.03 of its potential returns per unit of risk. Xiaomi is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 5,600 in Xiaomi on November 2, 2024 and sell it today you would earn a total of 5,251 from holding Xiaomi or generate 93.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.03% |
| Values | Daily Returns |
Textron vs. Xiaomi
Performance |
| Timeline |
| Textron |
| Xiaomi |
Textron and Xiaomi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Textron and Xiaomi
The main advantage of trading using opposite Textron and Xiaomi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Textron 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.| Textron vs. The Boeing | Textron vs. Lockheed Martin | Textron vs. General Dynamics | Textron vs. The Walt Disney |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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