Correlation Between Zepp Health and Xiaomi Corp

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

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

Diversification Opportunities for Zepp Health and Xiaomi Corp

-0.22

Correlation Coefficient

Zepp Health  Xiaomi Corp

Very good diversification

The 3 months correlation between Zepp and Xiaomi is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Zepp Health Corp and Xiaomi Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiaomi Corp and Zepp Health 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 Zepp Health Corp 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 has no effect on the direction of Zepp Health i.e., Zepp Health and Xiaomi Corp go up and down completely randomly.

Pair Corralation between Zepp Health and Xiaomi Corp

Given the investment horizon of 90 days Zepp Health is expected to generate 4.66 times less return on investment than Xiaomi Corp. In addition to that, Zepp Health is 1.75 times more volatile than Xiaomi Corp. It trades about 0.03 of its total potential returns per unit of risk. Xiaomi Corp is currently generating about 0.22 per unit of volatility. If you would invest  243.00  in Xiaomi Corp on August 31, 2024 and sell it today you would earn a total of  118.00  from holding Xiaomi Corp or generate 48.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Zepp Health Corp  vs.  Xiaomi Corp

Zepp Health Corp

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zepp Health Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Zepp Health may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Xiaomi Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xiaomi Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Xiaomi Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zepp Health and Xiaomi Corp

The main advantage of trading using opposite Zepp Health and Xiaomi Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zepp Health 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 Zepp Health Corp and Xiaomi Corp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..