Correlation Between Guocheng Mining and Chenzhou Jingui

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

Diversification Opportunities for Guocheng Mining and Chenzhou Jingui

0.84

Correlation Coefficient

Guocheng Mining  Chenzhou Jingui

Very poor diversification

The 3 months correlation between Guocheng and Chenzhou is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Guocheng Mining Co and Chenzhou Jingui Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chenzhou Jingui Silver 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 Chenzhou Jingui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chenzhou Jingui Silver has no effect on the direction of Guocheng Mining i.e., Guocheng Mining and Chenzhou Jingui go up and down completely randomly.

Pair Corralation between Guocheng Mining and Chenzhou Jingui

Assuming the 90 days trading horizon Guocheng Mining Co is expected to generate 1.27 times more return on investment than Chenzhou Jingui. However, Guocheng Mining is 1.27 times more volatile than Chenzhou Jingui Silver. It trades about 0.2 of its potential returns per unit of risk. Chenzhou Jingui Silver is currently generating about 0.14 per unit of risk. If you would invest  927.00  in Guocheng Mining Co on September 20, 2024 and sell it today you would earn a total of  547.00  from holding Guocheng Mining Co or generate 59.01% return on investment over 90 days.

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

Guocheng Mining Co  vs.  Chenzhou Jingui Silver

Guocheng Mining

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guocheng Mining Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guocheng Mining sustained solid returns over the last few months and may actually be approaching a breakup point.

Chenzhou Jingui Silver

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chenzhou Jingui Silver are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chenzhou Jingui sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guocheng Mining and Chenzhou Jingui

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

The idea behind Guocheng Mining Co and Chenzhou Jingui Silver 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.