Correlation Between Sino Land and Xinyuan Real

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

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

Diversification Opportunities for Sino Land and Xinyuan Real

0.5

Correlation Coefficient

Sino Land  Xinyuan Real

Very weak diversification

The 3 months correlation between Sino and Xinyuan is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Sino Land Co 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 Sino Land 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 Sino Land Co 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 Sino Land i.e., Sino Land and Xinyuan Real go up and down completely randomly.

Pair Corralation between Sino Land and Xinyuan Real

Assuming the 90 days horizon Sino Land is expected to generate 4.16 times less return on investment than Xinyuan Real. But when comparing it to its historical volatility, Sino Land Co is 2.78 times less risky than Xinyuan Real. It trades about 0.02 of its potential returns per unit of risk. Xinyuan Real Estate is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  256.00  in Xinyuan Real Estate on September 15, 2024 and sell it today you would earn a total of  8.00  from holding Xinyuan Real Estate or generate 3.13% return on investment over 90 days.

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

Sino Land Co  vs.  Xinyuan Real Estate

Sino Land

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sino Land Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Sino Land may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Sino Land and Xinyuan Real

The main advantage of trading using opposite Sino Land and Xinyuan Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sino Land 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 Sino Land Co 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.