Correlation Between Guocheng Mining and China Minmetals

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

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

Diversification Opportunities for Guocheng Mining and China Minmetals

0.26

Correlation Coefficient

Guocheng Mining  China Minmetals

Modest diversification

The 3 months correlation between Guocheng and China is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Guocheng Mining Co and China Minmetals Rare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Minmetals Rare and Guocheng 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 Guocheng Mining Co are associated (or correlated) with China Minmetals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Minmetals Rare has no effect on the direction of Guocheng Mining i.e., Guocheng Mining and China Minmetals go up and down completely randomly.

Pair Corralation between Guocheng Mining and China Minmetals

Assuming the 90 days trading horizon Guocheng Mining Co is expected to generate 1.91 times more return on investment than China Minmetals. However, Guocheng Mining is 1.91 times more volatile than China Minmetals Rare. It trades about -0.01 of its potential returns per unit of risk. China Minmetals Rare is currently generating about -0.23 per unit of risk. If you would invest  1,223  in Guocheng Mining Co on October 11, 2024 and sell it today you would lose (64.00) from holding Guocheng Mining Co or give up 5.23% of portfolio value over 90 days.

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

Guocheng Mining Co  vs.  China Minmetals Rare

Guocheng Mining

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guocheng Mining Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guocheng Mining may actually be approaching a critical reversion point that can send shares even higher in February 2025.

China Minmetals Rare

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Minmetals Rare are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Minmetals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Guocheng Mining and China Minmetals

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

The idea behind Guocheng Mining Co and China Minmetals Rare 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.