Correlation Between Xiandai Investment and Jiangsu Xinning

Can any of the company-specific risk be diversified away by investing in both Xiandai Investment and Jiangsu Xinning 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 Xiandai Investment and Jiangsu Xinning into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xiandai Investment Co and Jiangsu Xinning Modern, you can compare the effects of market volatilities on Xiandai Investment and Jiangsu Xinning 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 Xiandai Investment with a short position of Jiangsu Xinning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiandai Investment and Jiangsu Xinning.

Diversification Opportunities for Xiandai Investment and Jiangsu Xinning

0.86

Correlation Coefficient

Xiandai Investment  Jiangsu Xinning

Very poor diversification

The 3 months correlation between Xiandai and Jiangsu is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Xiandai Investment Co and Jiangsu Xinning Modern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Xinning Modern and Xiandai Investment 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 Xiandai Investment Co are associated (or correlated) with Jiangsu Xinning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Xinning Modern has no effect on the direction of Xiandai Investment i.e., Xiandai Investment and Jiangsu Xinning go up and down completely randomly.

Pair Corralation between Xiandai Investment and Jiangsu Xinning

Assuming the 90 days trading horizon Xiandai Investment Co is expected to under-perform the Jiangsu Xinning. But the stock apears to be less risky and, when comparing its historical volatility, Xiandai Investment Co is 1.71 times less risky than Jiangsu Xinning. The stock trades about -0.11 of its potential returns per unit of risk. The Jiangsu Xinning Modern is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  406.00  in Jiangsu Xinning Modern on September 25, 2024 and sell it today you would lose (8.00) from holding Jiangsu Xinning Modern or give up 1.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Xiandai Investment Co  vs.  Jiangsu Xinning Modern

Xiandai Investment

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xiandai Investment Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiandai Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiangsu Xinning Modern

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Xinning Modern are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Xinning sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xiandai Investment and Jiangsu Xinning

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

The idea behind Xiandai Investment Co and Jiangsu Xinning Modern 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.