Correlation Between Xinjiang Beixin and China Fortune

Can any of the company-specific risk be diversified away by investing in both Xinjiang Beixin and China Fortune 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 Xinjiang Beixin and China Fortune into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xinjiang Beixin RoadBridge and China Fortune Land, you can compare the effects of market volatilities on Xinjiang Beixin and China Fortune 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 Xinjiang Beixin with a short position of China Fortune. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinjiang Beixin and China Fortune.

Diversification Opportunities for Xinjiang Beixin and China Fortune

0.92

Correlation Coefficient

Xinjiang Beixin  China Fortune

Almost no diversification

The 3 months correlation between Xinjiang and China is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Xinjiang Beixin RoadBridge and China Fortune Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Fortune Land and Xinjiang Beixin 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 Xinjiang Beixin RoadBridge are associated (or correlated) with China Fortune. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Fortune Land has no effect on the direction of Xinjiang Beixin i.e., Xinjiang Beixin and China Fortune go up and down completely randomly.

Pair Corralation between Xinjiang Beixin and China Fortune

Assuming the 90 days trading horizon Xinjiang Beixin is expected to generate 3.66 times less return on investment than China Fortune. But when comparing it to its historical volatility, Xinjiang Beixin RoadBridge is 1.91 times less risky than China Fortune. It trades about 0.16 of its potential returns per unit of risk. China Fortune Land is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  107.00  in China Fortune Land on September 20, 2024 and sell it today you would earn a total of  214.00  from holding China Fortune Land or generate 200.0% return on investment over 90 days.

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

Xinjiang Beixin RoadBridge  vs.  China Fortune Land

Xinjiang Beixin Road

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Beixin RoadBridge are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinjiang Beixin sustained solid returns over the last few months and may actually be approaching a breakup point.

China Fortune Land

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in China Fortune Land are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Fortune sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xinjiang Beixin and China Fortune

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

The idea behind Xinjiang Beixin RoadBridge and China Fortune Land 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.

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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.