Correlation Between Xiaomi Corp and GoPro

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

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

Diversification Opportunities for Xiaomi Corp and GoPro

-0.81

Correlation Coefficient

Xiaomi Corp  GoPro

Pay attention - limited upside

The 3 months correlation between Xiaomi and GoPro is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Xiaomi Corp ADR and GoPro Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoPro Inc 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 ADR are associated (or correlated) with GoPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoPro Inc has no effect on the direction of Xiaomi Corp i.e., Xiaomi Corp and GoPro go up and down completely randomly.

Pair Corralation between Xiaomi Corp and GoPro

Assuming the 90 days horizon Xiaomi Corp ADR is expected to generate 0.96 times more return on investment than GoPro. However, Xiaomi Corp ADR is 1.04 times less risky than GoPro. It trades about 0.05 of its potential returns per unit of risk. GoPro Inc is currently generating about -0.07 per unit of risk. If you would invest  710.00  in Xiaomi Corp ADR on February 5, 2024 and sell it today you would earn a total of  465.00  from holding Xiaomi Corp ADR or generate 65.49% return on investment over 90 days.

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

Xiaomi Corp ADR  vs.  GoPro Inc

Xiaomi Corp ADR

Risk-Adjusted Performance

17 of 100

Solid

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

GoPro Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GoPro Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Xiaomi Corp and GoPro

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

The idea behind Xiaomi Corp ADR and GoPro Inc 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.