Correlation Between Shaanxi Beiyuan and Xiamen ITG

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

By analyzing existing cross correlation between Shaanxi Beiyuan Chemical and Xiamen ITG Group, you can compare the effects of market volatilities on Shaanxi Beiyuan and Xiamen ITG 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 Shaanxi Beiyuan with a short position of Xiamen ITG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shaanxi Beiyuan and Xiamen ITG.

Diversification Opportunities for Shaanxi Beiyuan and Xiamen ITG

0.62

Correlation Coefficient

Shaanxi Beiyuan  Xiamen ITG

Poor diversification

The 3 months correlation between Shaanxi and Xiamen is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Shaanxi Beiyuan Chemical and Xiamen ITG Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiamen ITG Group and Shaanxi Beiyuan 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 Shaanxi Beiyuan Chemical are associated (or correlated) with Xiamen ITG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiamen ITG Group has no effect on the direction of Shaanxi Beiyuan i.e., Shaanxi Beiyuan and Xiamen ITG go up and down completely randomly.

Pair Corralation between Shaanxi Beiyuan and Xiamen ITG

Assuming the 90 days trading horizon Shaanxi Beiyuan Chemical is expected to generate 0.72 times more return on investment than Xiamen ITG. However, Shaanxi Beiyuan Chemical is 1.38 times less risky than Xiamen ITG. It trades about 0.16 of its potential returns per unit of risk. Xiamen ITG Group is currently generating about 0.1 per unit of risk. If you would invest  371.00  in Shaanxi Beiyuan Chemical on September 23, 2024 and sell it today you would earn a total of  67.00  from holding Shaanxi Beiyuan Chemical or generate 18.06% return on investment over 90 days.

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

Shaanxi Beiyuan Chemical  vs.  Xiamen ITG Group

Shaanxi Beiyuan Chemical

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shaanxi Beiyuan Chemical are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shaanxi Beiyuan sustained solid returns over the last few months and may actually be approaching a breakup point.

Xiamen ITG Group

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Shaanxi Beiyuan and Xiamen ITG

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

The idea behind Shaanxi Beiyuan Chemical and Xiamen ITG 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.