Correlation Between Zhongrun Resources and Hainan Mining

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

By analyzing existing cross correlation between Zhongrun Resources Investment and Hainan Mining Co, you can compare the effects of market volatilities on Zhongrun Resources and Hainan Mining 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 Zhongrun Resources with a short position of Hainan Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhongrun Resources and Hainan Mining.

Diversification Opportunities for Zhongrun Resources and Hainan Mining

-0.13

Correlation Coefficient

Zhongrun Resources  Hainan Mining

Good diversification

The 3 months correlation between Zhongrun and Hainan is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Zhongrun Resources Investment and Hainan Mining Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Mining and Zhongrun Resources 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 Zhongrun Resources Investment are associated (or correlated) with Hainan Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Mining has no effect on the direction of Zhongrun Resources i.e., Zhongrun Resources and Hainan Mining go up and down completely randomly.

Pair Corralation between Zhongrun Resources and Hainan Mining

Assuming the 90 days trading horizon Zhongrun Resources Investment is expected to generate 2.31 times more return on investment than Hainan Mining. However, Zhongrun Resources is 2.31 times more volatile than Hainan Mining Co. It trades about 0.12 of its potential returns per unit of risk. Hainan Mining Co is currently generating about 0.01 per unit of risk. If you would invest  422.00  in Zhongrun Resources Investment on December 26, 2024 and sell it today you would earn a total of  99.00  from holding Zhongrun Resources Investment or generate 23.46% return on investment over 90 days.

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

Zhongrun Resources Investment  vs.  Hainan Mining Co

Zhongrun Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongrun Resources Investment are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongrun Resources sustained solid returns over the last few months and may actually be approaching a breakup point.

Hainan Mining

Risk-Adjusted Performance

Weak

Over the last 90 days Hainan Mining Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hainan Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Zhongrun Resources and Hainan Mining

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

The idea behind Zhongrun Resources Investment and Hainan Mining Co 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.