Correlation Between Xizi Clean and Hongrun Construction

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

By analyzing existing cross correlation between Xizi Clean Energy and Hongrun Construction Group, you can compare the effects of market volatilities on Xizi Clean and Hongrun Construction 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 Xizi Clean with a short position of Hongrun Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xizi Clean and Hongrun Construction.

Diversification Opportunities for Xizi Clean and Hongrun Construction

-0.09

Correlation Coefficient

Xizi Clean  Hongrun Construction

Good diversification

The 3 months correlation between Xizi and Hongrun is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Xizi Clean Energy and Hongrun Construction Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hongrun Construction and Xizi Clean 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 Xizi Clean Energy are associated (or correlated) with Hongrun Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hongrun Construction has no effect on the direction of Xizi Clean i.e., Xizi Clean and Hongrun Construction go up and down completely randomly.

Pair Corralation between Xizi Clean and Hongrun Construction

Assuming the 90 days trading horizon Xizi Clean Energy is expected to under-perform the Hongrun Construction. But the stock apears to be less risky and, when comparing its historical volatility, Xizi Clean Energy is 1.39 times less risky than Hongrun Construction. The stock trades about -0.05 of its potential returns per unit of risk. The Hongrun Construction Group is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  419.00  in Hongrun Construction Group on October 1, 2024 and sell it today you would earn a total of  88.00  from holding Hongrun Construction Group or generate 21.0% return on investment over 90 days.

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

Xizi Clean Energy  vs.  Hongrun Construction Group

Xizi Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xizi Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Hongrun Construction

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hongrun Construction Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hongrun Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xizi Clean and Hongrun Construction

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

The idea behind Xizi Clean Energy and Hongrun Construction Group 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.