Correlation Between Country Garden and Xinyuan Real

Can any of the company-specific risk be diversified away by investing in both Country Garden and Xinyuan Real 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 Country Garden and Xinyuan Real into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Country Garden Holdings and Xinyuan Real Estate, you can compare the effects of market volatilities on Country Garden and Xinyuan Real 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 Country Garden with a short position of Xinyuan Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Country Garden and Xinyuan Real.

Diversification Opportunities for Country Garden and Xinyuan Real

-0.23

Correlation Coefficient

Country Garden  Xinyuan Real

Very good diversification

The 3 months correlation between Country and Xinyuan is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Country Garden Holdings and Xinyuan Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinyuan Real Estate and Country Garden 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 Country Garden Holdings are associated (or correlated) with Xinyuan Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinyuan Real Estate has no effect on the direction of Country Garden i.e., Country Garden and Xinyuan Real go up and down completely randomly.

Pair Corralation between Country Garden and Xinyuan Real

Assuming the 90 days horizon Country Garden Holdings is expected to generate 5.03 times more return on investment than Xinyuan Real. However, Country Garden is 5.03 times more volatile than Xinyuan Real Estate. It trades about 0.12 of its potential returns per unit of risk. Xinyuan Real Estate is currently generating about 0.04 per unit of risk. If you would invest  20.00  in Country Garden Holdings on September 15, 2024 and sell it today you would lose (2.00) from holding Country Garden Holdings or give up 10.0% of portfolio value over 90 days.

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

Country Garden Holdings  vs.  Xinyuan Real Estate

Country Garden Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Country Garden Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Country Garden reported solid returns over the last few months and may actually be approaching a breakup point.

Xinyuan Real Estate

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xinyuan Real Estate are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile forward indicators, Xinyuan Real displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Country Garden and Xinyuan Real

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

The idea behind Country Garden Holdings and Xinyuan Real Estate 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..