Correlation Between Hubei Geoway and Xiandai Investment

Can any of the company-specific risk be diversified away by investing in both Hubei Geoway and Xiandai Investment 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 Xiandai Investment 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 Xiandai Investment Co, you can compare the effects of market volatilities on Hubei Geoway and Xiandai Investment 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 Xiandai Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hubei Geoway and Xiandai Investment.

Diversification Opportunities for Hubei Geoway and Xiandai Investment

0.47

Correlation Coefficient

Hubei Geoway  Xiandai Investment

Very weak diversification

The 3 months correlation between Hubei and Xiandai is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Hubei Geoway Investment and Xiandai Investment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiandai 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 Xiandai Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiandai Investment has no effect on the direction of Hubei Geoway i.e., Hubei Geoway and Xiandai Investment go up and down completely randomly.

Pair Corralation between Hubei Geoway and Xiandai Investment

Assuming the 90 days trading horizon Hubei Geoway is expected to generate 1.07 times less return on investment than Xiandai Investment. In addition to that, Hubei Geoway is 1.24 times more volatile than Xiandai Investment Co. It trades about 0.13 of its total potential returns per unit of risk. Xiandai Investment Co is currently generating about 0.17 per unit of volatility. If you would invest  354.00  in Xiandai Investment Co on September 24, 2024 and sell it today you would earn a total of  98.00  from holding Xiandai Investment Co or generate 27.68% return on investment over 90 days.

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

Hubei Geoway Investment  vs.  Xiandai Investment Co

Hubei Geoway Investment

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hubei Geoway Investment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hubei Geoway sustained solid returns over the last few months and may actually be approaching a breakup point.

Xiandai Investment

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xiandai Investment Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiandai Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hubei Geoway and Xiandai Investment

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

The idea behind Hubei Geoway Investment and Xiandai Investment Co 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.