Correlation Between Xunlei and Marchex

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

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

Diversification Opportunities for Xunlei and Marchex

0.29

Correlation Coefficient

Xunlei  Marchex

Modest diversification

The 3 months correlation between Xunlei and Marchex is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Xunlei Ltd Adr and Marchex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marchex and Xunlei 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 Xunlei Ltd Adr are associated (or correlated) with Marchex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marchex has no effect on the direction of Xunlei i.e., Xunlei and Marchex go up and down completely randomly.

Pair Corralation between Xunlei and Marchex

Given the investment horizon of 90 days Xunlei Ltd Adr is expected to generate 1.19 times more return on investment than Marchex. However, Xunlei is 1.19 times more volatile than Marchex. It trades about 0.12 of its potential returns per unit of risk. Marchex is currently generating about 0.08 per unit of risk. If you would invest  158.00  in Xunlei Ltd Adr on September 14, 2024 and sell it today you would earn a total of  51.80  from holding Xunlei Ltd Adr or generate 32.78% return on investment over 90 days.

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

Xunlei Ltd Adr  vs.  Marchex

Xunlei Ltd Adr

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xunlei Ltd Adr are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, Xunlei unveiled solid returns over the last few months and may actually be approaching a breakup point.

Marchex

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Marchex are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical indicators, Marchex showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xunlei and Marchex

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

The idea behind Xunlei Ltd Adr and Marchex 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.