Correlation Between Xiaomi Corp and TCL Electronics

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

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

Diversification Opportunities for Xiaomi Corp and TCL Electronics

0.23

Correlation Coefficient

Xiaomi Corp  TCL Electronics

Modest diversification

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

Pair Corralation between Xiaomi Corp and TCL Electronics

Assuming the 90 days horizon Xiaomi Corp ADR is expected to generate 0.68 times more return on investment than TCL Electronics. However, Xiaomi Corp ADR is 1.46 times less risky than TCL Electronics. It trades about 0.21 of its potential returns per unit of risk. TCL Electronics Holdings is currently generating about 0.07 per unit of risk. 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

Xiaomi Corp ADR  vs.  TCL Electronics Holdings

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.

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.

Pair Trading with Xiaomi Corp and TCL Electronics

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

The idea behind Xiaomi Corp ADR and TCL Electronics Holdings 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.