Correlation Between Shengda Mining and Tianshan Aluminum

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

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

Diversification Opportunities for Shengda Mining and Tianshan Aluminum

0.66

Correlation Coefficient

Shengda Mining  Tianshan Aluminum

Poor diversification

The 3 months correlation between Shengda and Tianshan is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Shengda Mining Co and Tianshan Aluminum Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianshan Aluminum and Shengda Mining 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 Shengda Mining Co are associated (or correlated) with Tianshan Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianshan Aluminum has no effect on the direction of Shengda Mining i.e., Shengda Mining and Tianshan Aluminum go up and down completely randomly.

Pair Corralation between Shengda Mining and Tianshan Aluminum

Assuming the 90 days trading horizon Shengda Mining is expected to generate 5.08 times less return on investment than Tianshan Aluminum. In addition to that, Shengda Mining is 1.44 times more volatile than Tianshan Aluminum Group. It trades about 0.01 of its total potential returns per unit of risk. Tianshan Aluminum Group is currently generating about 0.04 per unit of volatility. If you would invest  604.00  in Tianshan Aluminum Group on October 3, 2024 and sell it today you would earn a total of  183.00  from holding Tianshan Aluminum Group or generate 30.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.74%
Values	Daily Returns

Shengda Mining Co  vs.  Tianshan Aluminum Group

Shengda Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shengda Mining Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Tianshan Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Shengda Mining and Tianshan Aluminum

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

The idea behind Shengda Mining Co and Tianshan Aluminum 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..