Correlation Between Xinyuan Real and Holiday Island

Can any of the company-specific risk be diversified away by investing in both Xinyuan Real and Holiday Island 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 Holiday Island 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 Holiday Island Holdings, you can compare the effects of market volatilities on Xinyuan Real and Holiday Island 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 Holiday Island. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinyuan Real and Holiday Island.

Diversification Opportunities for Xinyuan Real and Holiday Island

-0.14

Correlation Coefficient

Xinyuan Real  Holiday Island

Good diversification

The 3 months correlation between Xinyuan and Holiday is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Xinyuan Real Estate and Holiday Island Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holiday Island Holdings 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 Holiday Island. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holiday Island Holdings has no effect on the direction of Xinyuan Real i.e., Xinyuan Real and Holiday Island go up and down completely randomly.

Pair Corralation between Xinyuan Real and Holiday Island

Considering the 90-day investment horizon Xinyuan Real is expected to generate 1.53 times less return on investment than Holiday Island. But when comparing it to its historical volatility, Xinyuan Real Estate is 1.91 times less risky than Holiday Island. It trades about 0.04 of its potential returns per unit of risk. Holiday Island Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3.73  in Holiday Island Holdings on September 15, 2024 and sell it today you would lose (1.54) from holding Holiday Island Holdings or give up 41.29% of portfolio value over 90 days.

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

Xinyuan Real Estate  vs.  Holiday Island Holdings

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.

Holiday Island Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Holiday Island Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Holiday Island demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xinyuan Real and Holiday Island

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

The idea behind Xinyuan Real Estate and Holiday Island 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.