Correlation Between Xinke Material and Sinosteel Luonai

Can any of the company-specific risk be diversified away by investing in both Xinke Material and Sinosteel Luonai 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 Xinke Material and Sinosteel Luonai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xinke Material and Sinosteel Luonai Materials, you can compare the effects of market volatilities on Xinke Material and Sinosteel Luonai 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 Xinke Material with a short position of Sinosteel Luonai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinke Material and Sinosteel Luonai.

Diversification Opportunities for Xinke Material and Sinosteel Luonai

0.95

Correlation Coefficient

Xinke Material  Sinosteel Luonai

Almost no diversification

The 3 months correlation between Xinke and Sinosteel is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Xinke Material and Sinosteel Luonai Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinosteel Luonai Mat and Xinke Material 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 Xinke Material are associated (or correlated) with Sinosteel Luonai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinosteel Luonai Mat has no effect on the direction of Xinke Material i.e., Xinke Material and Sinosteel Luonai go up and down completely randomly.

Pair Corralation between Xinke Material and Sinosteel Luonai

Assuming the 90 days trading horizon Xinke Material is expected to generate 1.06 times more return on investment than Sinosteel Luonai. However, Xinke Material is 1.06 times more volatile than Sinosteel Luonai Materials. It trades about 0.01 of its potential returns per unit of risk. Sinosteel Luonai Materials is currently generating about -0.03 per unit of risk. If you would invest  267.00  in Xinke Material on September 4, 2024 and sell it today you would lose (19.00) from holding Xinke Material or give up 7.12% of portfolio value over 90 days.

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

Xinke Material  vs.  Sinosteel Luonai Materials

Xinke Material

Risk-Adjusted Performance

17 of 100

Solid

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

Sinosteel Luonai Mat

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sinosteel Luonai Materials are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sinosteel Luonai sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xinke Material and Sinosteel Luonai

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

The idea behind Xinke Material and Sinosteel Luonai Materials 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.