Correlation Between XCMG Construction and Yunnan Chihong

Can any of the company-specific risk be diversified away by investing in both XCMG Construction and Yunnan Chihong 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 XCMG Construction and Yunnan Chihong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between XCMG Construction Machinery and Yunnan Chihong ZincGermanium, you can compare the effects of market volatilities on XCMG Construction and Yunnan Chihong 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 XCMG Construction with a short position of Yunnan Chihong. Check out your portfolio center. Please also check ongoing floating volatility patterns of XCMG Construction and Yunnan Chihong.

Diversification Opportunities for XCMG Construction and Yunnan Chihong

0.89

Correlation Coefficient

XCMG Construction  Yunnan Chihong

Very poor diversification

The 3 months correlation between XCMG and Yunnan is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding XCMG Construction Machinery and Yunnan Chihong ZincGermanium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yunnan Chihong ZincG and XCMG Construction 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 XCMG Construction Machinery are associated (or correlated) with Yunnan Chihong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yunnan Chihong ZincG has no effect on the direction of XCMG Construction i.e., XCMG Construction and Yunnan Chihong go up and down completely randomly.

Pair Corralation between XCMG Construction and Yunnan Chihong

Assuming the 90 days trading horizon XCMG Construction is expected to generate 1.64 times less return on investment than Yunnan Chihong. But when comparing it to its historical volatility, XCMG Construction Machinery is 1.06 times less risky than Yunnan Chihong. It trades about 0.04 of its potential returns per unit of risk. Yunnan Chihong ZincGermanium is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  532.00  in Yunnan Chihong ZincGermanium on September 27, 2024 and sell it today you would earn a total of  39.00  from holding Yunnan Chihong ZincGermanium or generate 7.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

XCMG Construction Machinery  vs.  Yunnan Chihong ZincGermanium

XCMG Construction

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in XCMG Construction Machinery are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, XCMG Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Yunnan Chihong ZincG

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yunnan Chihong ZincGermanium are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yunnan Chihong may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with XCMG Construction and Yunnan Chihong

The main advantage of trading using opposite XCMG Construction and Yunnan Chihong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XCMG Construction position performs unexpectedly, Yunnan Chihong 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 Yunnan Chihong will offset losses from the drop in Yunnan Chihong's long position.

The idea behind XCMG Construction Machinery and Yunnan Chihong ZincGermanium 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.