Correlation Between Xinyuan Real and AMREP

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

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

Diversification Opportunities for Xinyuan Real and AMREP

-0.25

Correlation Coefficient

Xinyuan Real  AMREP

Very good diversification

The 3 months correlation between Xinyuan and AMREP is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Xinyuan Real Estate and AMREP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMREP and Xinyuan Real 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 Xinyuan Real Estate are associated (or correlated) with AMREP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMREP has no effect on the direction of Xinyuan Real i.e., Xinyuan Real and AMREP go up and down completely randomly.

Pair Corralation between Xinyuan Real and AMREP

Considering the 90-day investment horizon Xinyuan Real is expected to generate 1.5 times less return on investment than AMREP. In addition to that, Xinyuan Real is 2.59 times more volatile than AMREP. It trades about 0.04 of its total potential returns per unit of risk. AMREP is currently generating about 0.16 per unit of volatility. If you would invest  2,613  in AMREP on September 16, 2024 and sell it today you would earn a total of  1,029  from holding AMREP or generate 39.38% return on investment over 90 days.

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

Xinyuan Real Estate  vs.  AMREP

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 weak forward indicators, Xinyuan Real displayed solid returns over the last few months and may actually be approaching a breakup point.

AMREP

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AMREP are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, AMREP reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xinyuan Real and AMREP

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

The idea behind Xinyuan Real Estate and AMREP 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.