Correlation Between Hunan Investment and Chengtun Mining

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

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

Diversification Opportunities for Hunan Investment and Chengtun Mining

0.21

Correlation Coefficient

Hunan Investment  Chengtun Mining

Modest diversification

The 3 months correlation between Hunan and Chengtun is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Investment Group and Chengtun Mining Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chengtun Mining Group and Hunan Investment 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 Hunan Investment Group are associated (or correlated) with Chengtun Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chengtun Mining Group has no effect on the direction of Hunan Investment i.e., Hunan Investment and Chengtun Mining go up and down completely randomly.

Pair Corralation between Hunan Investment and Chengtun Mining

Assuming the 90 days trading horizon Hunan Investment Group is expected to generate 0.94 times more return on investment than Chengtun Mining. However, Hunan Investment Group is 1.06 times less risky than Chengtun Mining. It trades about 0.01 of its potential returns per unit of risk. Chengtun Mining Group is currently generating about -0.01 per unit of risk. If you would invest  526.00  in Hunan Investment Group on October 11, 2024 and sell it today you would lose (28.00) from holding Hunan Investment Group or give up 5.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Hunan Investment Group  vs.  Chengtun Mining Group

Hunan Investment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Investment Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Chengtun Mining Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chengtun Mining Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chengtun Mining sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hunan Investment and Chengtun Mining

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

The idea behind Hunan Investment Group and Chengtun Mining Group 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.