Correlation Between Xiaomi Corp and Vizio Holding

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

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

Diversification Opportunities for Xiaomi Corp and Vizio Holding

0.49

Correlation Coefficient

Xiaomi Corp  Vizio Holding

Very weak diversification

The 3 months correlation between Xiaomi and Vizio is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Xiaomi Corp and Vizio Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vizio Holding Corp 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 are associated (or correlated) with Vizio Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vizio Holding Corp has no effect on the direction of Xiaomi Corp i.e., Xiaomi Corp and Vizio Holding go up and down completely randomly.

Pair Corralation between Xiaomi Corp and Vizio Holding

Assuming the 90 days horizon Xiaomi Corp is expected to generate 3.68 times more return on investment than Vizio Holding. However, Xiaomi Corp is 3.68 times more volatile than Vizio Holding Corp. It trades about 0.04 of its potential returns per unit of risk. Vizio Holding Corp is currently generating about -0.24 per unit of risk. If you would invest  217.00  in Xiaomi Corp on February 1, 2024 and sell it today you would earn a total of  3.00  from holding Xiaomi Corp or generate 1.38% return on investment over 90 days.

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

Xiaomi Corp  vs.  Vizio Holding Corp

Xiaomi Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xiaomi Corp are ranked lower than 13 (%) 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.

Vizio Holding Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vizio Holding Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Vizio Holding displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xiaomi Corp and Vizio Holding

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

The idea behind Xiaomi Corp and Vizio Holding 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.