Correlation Between Tongling Nonferrous and Zijin Mining

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

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

Diversification Opportunities for Tongling Nonferrous and Zijin Mining

0.87

Correlation Coefficient

Tongling Nonferrous  Zijin Mining

Very poor diversification

The 3 months correlation between Tongling and Zijin is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Tongling Nonferrous Metals and Zijin Mining Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zijin Mining Group and Tongling Nonferrous 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 Tongling Nonferrous Metals are associated (or correlated) with Zijin Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zijin Mining Group has no effect on the direction of Tongling Nonferrous i.e., Tongling Nonferrous and Zijin Mining go up and down completely randomly.

Pair Corralation between Tongling Nonferrous and Zijin Mining

Assuming the 90 days trading horizon Tongling Nonferrous Metals is expected to generate 1.17 times more return on investment than Zijin Mining. However, Tongling Nonferrous is 1.17 times more volatile than Zijin Mining Group. It trades about 0.06 of its potential returns per unit of risk. Zijin Mining Group is currently generating about 0.01 per unit of risk. If you would invest  302.00  in Tongling Nonferrous Metals on August 31, 2024 and sell it today you would earn a total of  24.00  from holding Tongling Nonferrous Metals or generate 7.95% return on investment over 90 days.

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

Tongling Nonferrous Metals  vs.  Zijin Mining Group

Tongling Nonferrous

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tongling Nonferrous Metals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tongling Nonferrous may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Zijin Mining Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zijin Mining Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Zijin 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 Tongling Nonferrous and Zijin Mining

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

The idea behind Tongling Nonferrous Metals and Zijin 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.