Correlation Between Epoxy Base and Xiamen CD

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

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

Diversification Opportunities for Epoxy Base and Xiamen CD

0.74

Correlation Coefficient

Epoxy Base  Xiamen CD

Poor diversification

The 3 months correlation between Epoxy and Xiamen is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Epoxy Base Electronic and Xiamen CD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiamen CD and Epoxy Base 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 Epoxy Base Electronic are associated (or correlated) with Xiamen CD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiamen CD has no effect on the direction of Epoxy Base i.e., Epoxy Base and Xiamen CD go up and down completely randomly.

Pair Corralation between Epoxy Base and Xiamen CD

Assuming the 90 days trading horizon Epoxy Base Electronic is expected to generate 1.46 times more return on investment than Xiamen CD. However, Epoxy Base is 1.46 times more volatile than Xiamen CD. It trades about 0.16 of its potential returns per unit of risk. Xiamen CD is currently generating about 0.18 per unit of risk. If you would invest  433.00  in Epoxy Base Electronic on September 12, 2024 and sell it today you would earn a total of  192.00  from holding Epoxy Base Electronic or generate 44.34% return on investment over 90 days.

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

Epoxy Base Electronic  vs.  Xiamen CD

Epoxy Base Electronic

Risk-Adjusted Performance

12 of 100

Good

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

Xiamen CD

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Epoxy Base and Xiamen CD

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

The idea behind Epoxy Base Electronic and Xiamen CD 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.