Correlation Between Xian International and Kunshan Guoli

Can any of the company-specific risk be diversified away by investing in both Xian International and Kunshan Guoli 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 Xian International and Kunshan Guoli into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xian International Medical and Kunshan Guoli Electronic, you can compare the effects of market volatilities on Xian International and Kunshan Guoli 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 Xian International with a short position of Kunshan Guoli. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xian International and Kunshan Guoli.

Diversification Opportunities for Xian International and Kunshan Guoli

0.87

Correlation Coefficient

Xian International  Kunshan Guoli

Very poor diversification

The 3 months correlation between Xian and Kunshan is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Xian International Medical and Kunshan Guoli Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kunshan Guoli Electronic and Xian International 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 Xian International Medical are associated (or correlated) with Kunshan Guoli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kunshan Guoli Electronic has no effect on the direction of Xian International i.e., Xian International and Kunshan Guoli go up and down completely randomly.

Pair Corralation between Xian International and Kunshan Guoli

Assuming the 90 days trading horizon Xian International is expected to generate 1.06 times less return on investment than Kunshan Guoli. But when comparing it to its historical volatility, Xian International Medical is 1.19 times less risky than Kunshan Guoli. It trades about 0.2 of its potential returns per unit of risk. Kunshan Guoli Electronic is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,797  in Kunshan Guoli Electronic on September 18, 2024 and sell it today you would earn a total of  1,419  from holding Kunshan Guoli Electronic or generate 50.73% return on investment over 90 days.

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

Xian International Medical  vs.  Kunshan Guoli Electronic

Xian International

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xian International Medical are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xian International sustained solid returns over the last few months and may actually be approaching a breakup point.

Kunshan Guoli Electronic

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kunshan Guoli Electronic are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kunshan Guoli sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xian International and Kunshan Guoli

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

The idea behind Xian International Medical and Kunshan Guoli Electronic 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.