Correlation Between Xinjiang Communications and China Publishing

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

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

Diversification Opportunities for Xinjiang Communications and China Publishing

0.79

Correlation Coefficient

Xinjiang Communications  China Publishing

Poor diversification

The 3 months correlation between Xinjiang and China is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Xinjiang Communications Constr and China Publishing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Publishing Media and Xinjiang Communications 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 Communications Construction are associated (or correlated) with China Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Publishing Media has no effect on the direction of Xinjiang Communications i.e., Xinjiang Communications and China Publishing go up and down completely randomly.

Pair Corralation between Xinjiang Communications and China Publishing

Assuming the 90 days trading horizon Xinjiang Communications Construction is expected to generate 0.92 times more return on investment than China Publishing. However, Xinjiang Communications Construction is 1.09 times less risky than China Publishing. It trades about 0.09 of its potential returns per unit of risk. China Publishing Media is currently generating about 0.07 per unit of risk. If you would invest  1,017  in Xinjiang Communications Construction on September 27, 2024 and sell it today you would earn a total of  174.00  from holding Xinjiang Communications Construction or generate 17.11% return on investment over 90 days.

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

Xinjiang Communications Constr  vs.  China Publishing Media

Xinjiang Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Communications Construction are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinjiang Communications sustained solid returns over the last few months and may actually be approaching a breakup point.

China Publishing Media

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Publishing Media are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Publishing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xinjiang Communications and China Publishing

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

The idea behind Xinjiang Communications Construction and China Publishing Media 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.