I recently noticed some Einsteins complaining about the US markets dragging down XIN. Since I spent some time in a beige room with similarly interesting people today I bothered disproving that with some simple analysis:
The correlation coefficient (r) is a measure of the correlation between two variables where -1 indicates an extremely strong negative correlation, 1 an extremely strong positive correlation and 0 no correlation at all.
Discarding the disastrous first years of XINs US listing we start our analysis with 2010. This is a really small sample.
For XIN and DOW between 2010 and today r = -0.0792.
This means as one variable decreases the other increases, and vice versa, and so suggests XIN is actually a hedge against a weak DOW (lololol)! It should be noted though the correlation is extremely weak and probably completely arbitrary, a standard error, and most likely not statistically significant at any meaningful level. Its a joke.
Lets say that for some reason beyond our comprehension (or perhaps the US project, or mention thereof, or some sort of new liberal Chinese leader, or whatever) XIN and the DOW became more correlated. So lets take a look at the year to date (which is a ridiculously small sample, but whatever):
r = 0.0281
So, I hear you scream, "But John, XIN is like ULTRA - volatile can that be like a meaningful comparison??" and you are completely right. So lets moderate r for beta:
r = 0.187
More meaningful? Yes. Meaningful? No. Why is that? 1. The sample size is much to small, even smaller than a fiscal year. 2. Without testing it my educated guess is that r is probably meaningful at the 10-20% level of significance, so we have a 10-20% of making a Type 1 error meaning XIN and the DOW are actually not related at all in the above percentage of cases. 3. Even if the result is significant, the correlation is still extremely small and, oh yeah, the sample is much too small.
So rationally - No, the US markets or more specifically the DOW probably do not impact XIN.
Farvor, the correlation coefficient works both ways (hence correlation coefficient and not Oh-sweet-Jesus-we-are-sinking coefficient). Actually a negative coefficient would mean that XIN rises as the DOW falls (though discard that example because our above negative coefficient is a joke).
That aside, I do see your logic and it makes intuitive sense. The data does not support it though, but you need not worry as the data is often being a counter-intuitive #$%$.
However it is possible to isolate elasticity phenomena such as a down DOW blocking the magnitude of a price increase of XIN´s but we would need a ton more data, including intra day price points in significant quantity, to do that. Unfortunately we dont have this data and it is pretty much impossible to do/predict the analysis without it.