Correlation Between Guocheng Mining and Shandong Mining

Can any of the company-specific risk be diversified away by investing in both Guocheng Mining and Shandong 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 Guocheng Mining and Shandong Mining 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 Shandong Mining Machinery, you can compare the effects of market volatilities on Guocheng Mining and Shandong 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 Guocheng Mining with a short position of Shandong Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guocheng Mining and Shandong Mining.

Diversification Opportunities for Guocheng Mining and Shandong Mining

0.19

Correlation Coefficient

Guocheng Mining  Shandong Mining

Average diversification

The 3 months correlation between Guocheng and Shandong is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Guocheng Mining Co and Shandong Mining Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Mining Machinery 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 Shandong Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Mining Machinery has no effect on the direction of Guocheng Mining i.e., Guocheng Mining and Shandong Mining go up and down completely randomly.

Pair Corralation between Guocheng Mining and Shandong Mining

Assuming the 90 days trading horizon Guocheng Mining Co is expected to under-perform the Shandong Mining. But the stock apears to be less risky and, when comparing its historical volatility, Guocheng Mining Co is 1.67 times less risky than Shandong Mining. The stock trades about -0.08 of its potential returns per unit of risk. The Shandong Mining Machinery is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  436.00  in Shandong Mining Machinery on December 3, 2024 and sell it today you would lose (32.00) from holding Shandong Mining Machinery or give up 7.34% of portfolio value over 90 days.

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

Guocheng Mining Co  vs.  Shandong Mining Machinery

Guocheng Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guocheng Mining Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Shandong Mining Machinery

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Guocheng Mining Co and Shandong Mining Machinery 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.