Correlation Between Hubei Geoway and Xiamen Insight

Can any of the company-specific risk be diversified away by investing in both Hubei Geoway and Xiamen Insight 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 Hubei Geoway and Xiamen Insight into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hubei Geoway Investment and Xiamen Insight Investment, you can compare the effects of market volatilities on Hubei Geoway and Xiamen Insight 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 Hubei Geoway with a short position of Xiamen Insight. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hubei Geoway and Xiamen Insight.

Diversification Opportunities for Hubei Geoway and Xiamen Insight

-0.43

Correlation Coefficient

Hubei Geoway  Xiamen Insight

Very good diversification

The 3 months correlation between Hubei and Xiamen is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Hubei Geoway Investment and Xiamen Insight Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiamen Insight Investment and Hubei Geoway 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 Hubei Geoway Investment are associated (or correlated) with Xiamen Insight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiamen Insight Investment has no effect on the direction of Hubei Geoway i.e., Hubei Geoway and Xiamen Insight go up and down completely randomly.

Pair Corralation between Hubei Geoway and Xiamen Insight

Assuming the 90 days trading horizon Hubei Geoway Investment is expected to under-perform the Xiamen Insight. In addition to that, Hubei Geoway is 1.1 times more volatile than Xiamen Insight Investment. It trades about -0.09 of its total potential returns per unit of risk. Xiamen Insight Investment is currently generating about 0.09 per unit of volatility. If you would invest  4,194  in Xiamen Insight Investment on September 29, 2024 and sell it today you would earn a total of  239.00  from holding Xiamen Insight Investment or generate 5.7% return on investment over 90 days.

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

Hubei Geoway Investment  vs.  Xiamen Insight Investment

Hubei Geoway Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hubei Geoway Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hubei Geoway is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Xiamen Insight Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xiamen Insight Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hubei Geoway and Xiamen Insight

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

The idea behind Hubei Geoway Investment and Xiamen Insight Investment 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.