Correlation Between TCL Electronics and Xiaomi Corp

Can any of the company-specific risk be diversified away by investing in both TCL Electronics and Xiaomi Corp 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 TCL Electronics and Xiaomi Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TCL Electronics Holdings and Xiaomi Corp ADR, you can compare the effects of market volatilities on TCL Electronics and Xiaomi Corp 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 TCL Electronics with a short position of Xiaomi Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of TCL Electronics and Xiaomi Corp.

Diversification Opportunities for TCL Electronics and Xiaomi Corp

0.23

Correlation Coefficient

TCL Electronics  Xiaomi Corp

Modest diversification

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

Pair Corralation between TCL Electronics and Xiaomi Corp

Assuming the 90 days horizon TCL Electronics is expected to generate 1.98 times less return on investment than Xiaomi Corp. In addition to that, TCL Electronics is 1.46 times more volatile than Xiaomi Corp ADR. It trades about 0.07 of its total potential returns per unit of risk. Xiaomi Corp ADR is currently generating about 0.21 per unit of volatility. If you would invest  1,268  in Xiaomi Corp ADR on September 19, 2024 and sell it today you would earn a total of  672.00  from holding Xiaomi Corp ADR or generate 53.0% return on investment over 90 days.

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

TCL Electronics Holdings  vs.  Xiaomi Corp ADR

TCL Electronics Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TCL Electronics Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, TCL Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Xiaomi Corp ADR

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xiaomi Corp ADR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Xiaomi Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TCL Electronics and Xiaomi Corp

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

The idea behind TCL Electronics Holdings and Xiaomi Corp ADR 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.